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Cisco Tops Expectations for 9th Straight Quarter

Earnings: Company reports 55% rise in sales but cautions that parts shortages could hurt in future.

May 10, 2000|From Associated Press

SAN JOSE — Defying concerns it cannot sustain its string of quarterly profits, Internet equipment provider Cisco Systems Inc. topped Wall Street expectations for the ninth consecutive period on strong sales of equipment for routing Web and data traffic.

But Cisco cautioned that parts shortages could hurt its ability to meet future expectations.

For the three months ended April 29, the San Jose-based company reported net income of $662 million, or 9 cents a share, up from $636 million, or 9 cents a share, in the year-ago period.

But excluding hefty research and development write-offs as well as several other one-time items, Cisco earned $1.03 billion, or 14 cents a share, in the latest quarter, compared with $649 million, or 9 cents, a year earlier.

As has been the pattern, Cisco's earnings exceeded expectations by a penny a share. Analysts surveyed by First Call/Thomson Financial had expected the company to earn 13 cents a share, excluding charges.

Sales rose 55% to $4.92 billion from $3.17 billion a year ago, also topping Wall Street expectations.

Chief Executive John Chambers said on a conference call after the report that the company has had a harder time getting parts for its equipment than in the past, and that any continued or increased shortages could "negatively impact" Cisco's ability to meet expectations.

"New markets where we participate are ramping very quickly and consuming significant component capacity," Chambers said. Memory chips, optical components and other parts used in wireless and fiber-optic equipment are particularly scarce, he said.

Cisco has emerged as one of the most stable technology companies in the nation--making it one of the two most valuable companies in the world--because of soaring demand for its switches, routers and fiber-optic equipment. They are used to direct communications traffic for both corporate computer networks and the broader, public networks run by telecommunications companies and Internet service providers.

"Given our size and the fact that the third-quarter has historically been the most challenging quarter, we were very pleased with the results," Chambers said.

Cisco said it posted its best showing in the business enterprise sector in two years as competitors exited the market and sales picked up in post-Y2K buying. The service provider business, including wireless networks, is expected to outpace core enterprise sales in coming years, company executives said.

Cisco shares finished unchanged on Nasdaq at $62.75 after a roller-coaster session a day earlier. In after-hours trading, shares rose to $63.

Separately Tuesday, the Securities and Exchange Commission is investigating possible insider trading in the stock of ArrowPoint Communications Inc. ahead of Cisco's announcement last week that it would acquire it.

A Cisco spokesman confirmed Tuesday that the SEC had made a preliminary inquiry into the all-stock acquisition, now valued at about $5.6 billion. "This is a routine process for acquisitions of public companies," Cisco said in a statement.

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