Cisco Profits up 27%

CHICAGO (Reuters) – Cisco Systems Inc. (NasdaqNM:CSCO</p>

– News) on Tuesday said

quarterly net income rose 27 percent, but the data networking equipment maker

broke with tradition by failing to top Wall Street estimates, and its shares

dropped.

“I kind of consider this a miss, because they usually beat by a penny,” said

Shawn Campbell, principal of Chicago-based Campbell Asset Management, who does

not own Cisco shares but follows the stock closely, of Cisco’s results.

Cisco shares fell 6 percent in after-hours trade on Instinet after closing at

$18.86 on the Nasdaq.

Cisco said quarterly profit rose due to market share gains in the high-end,

high-profit router and switch businesses even as weak corporate spending pushed

revenue lower.

The San Jose, California-based company reported a net profit in its fiscal

fourth quarter of $982 million, or 14 cents a share, compared with a net profit

of $772 million, or 10 cents a share, in the year-ago quarter.

Cisco has posted its three best quarterly net profits in the last three

quarters, as it steals customers from its rivals in the cutthroat market for

the routers and switches that direct traffic on networks.

Excluding one-time items, Cisco earned 15 cents a share.

On that basis, analysts had expected Cisco to post a fourth-quarter profit

before one-time items of 15 cents a share on sales of $4.68 billion, according

to Reuters Research, a unit of Reuters Group Plc.

Sales in the quarter ended July 26 fell to $4.70 billion from $4.83 billion,

amid tight corporate spending, but rose slightly from the third quarter’s $4.62

billion.

Cisco Chief Executive John Chambers said in May the company expected

fourth-quarter sales to be even with the third quarter. However, when pressed,

he said he had an upward bias on the expected sales.

“Some people look at the United States and feel the economy is turning a

corner, and some of Cisco’s peers’ recent results made some sell-side analysts

more optimistic,” said Rob Siewert, an analyst with Victory Capital Management,

a Cleveland-based asset management company that owns Cisco shares.

Smaller rival Juniper Networks Inc. (NasdaqNM:JNPR

– News

) last month forecast sales in the third quarter would be flat from the

previous quarter, slightly above Wall Street expectations.

Spending by corporate customers, which accounts for about 80 percent of Cisco’s

sales, has slumped in the weak economy. Demand in the beleaguered telecom

sector, which accounts for the rest of Cisco’s sales, has slumped drastically

over the past two years.

Cisco shares fell to $17.70 on Instinet in after-hours trading on Tuesday,

after closing at $18.86 on the Nasdaq.

(Additional reporting by Duncan Martell in San Francisco)

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