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5/10/2005
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Cisco Posts Gains In Sales And Profits

Net sales for the quarter were $6.2 billion, up from $5.6 billion a year earlier, while net income was $1.4 billion, up from $1.2 billion.

Cisco Systems, the world largest maker of networking equipment, reported double-digit gains year over year in sales and profits for its third fiscal quarter of 2005 ended April 30, the company reported Tuesday after the stock market closed.

Net sales for the quarter were $6.2 billion, up from $5.6 billion a year earlier, while net income was $1.4 billion, up from $1.2 billion. The company said solid gains were reported in just about every geographical region, customer category, and product market segment.

Cisco CEO John Chambers said in a teleconference that he was optimistic enough about additional growth to authorize the hiring of more sales staff. In a statement released with the financial report, Chambers said: "Today's results are a clear indication that our integrated technology strategy is working--customers are realizing the benefits of an intelligent network architecture."

The networking market should grow from 10% to 15% in the next quarter, and whether Cisco is at the high end or the low end of that range will depend on how well it executes, he said.

The strongest growth came in sales to telecommunications companies and service providers, where orders for products jumped 20% over the previous quarter and increased 25% from the quarter a year earlier. The growth in the U.S. service provider market was 40%. Cisco in the past few months reported orders from British Telecom, NTT Communications of Japan, Sprint, and others.

Cisco is benefiting from the move by communications service providers to an IP infrastructure so they can more easily offer voice, video, and data services using the same equipment, Chambers said.

"We're starting to see carriers make their decisions for their next-generation IP networks. Cable-TV companies were some of the first, along with international companies, to embrace IP," Cisco chief technology officer Charles Giancarlo says. "Wireless players have started to do that as well. U.S. local exchange companies are some of the more recent converts."

The enterprise IP telephony market also showed strong growth, increasing 15% quarter over quarter and more than 30% from the quarter a year ago. Cisco said it has shipped its 5 millionth IP telephone and that, overall, sales of IP telephony equipment to businesses have hit an annual rate of $1 billion.

"Soon we will be come the largest provider of enterprise telephony equipment," Chambers said.

However, the enterprise market showed the weakest overall growth of Cisco's four customer categories: commercial, consumer, enterprise, and service provider. Spending by business-technology managers remains cautious, although it's improving, Giancarlo says. "It's the same caution that we've seen for a long time," he says. "But we're pretty pleased with our overall performance. We think we picked up market share in switching and routing, as well as in IP telephony and security."

Other areas that showed strong growth were storage area networks, which posted gains of 70% year over year, as well as wireless and security products. "We've never seen as much activity or interest in security as we do now," Chambers said.

Two areas that Cisco is looking at in terms of future growth are the data center, where Chambers sees a growing opportunity to provide technology to help companies virtualize resources like processing power and storage, and making networks more sensitive to and aware of applications.

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