Cisco Reports Gains In Sales, Earnings

Cisco Systems on Wednesday reported healthy earnings and a 9% year-over-year sales gain for its first quarter ended Oct. 26. That led CEO John Chambers to proclaim that financially, the networking equipment maker is "very close to the levels reached at the height of our industry's late 1990s activity prior to the downturn."

Cisco reported net income of $618 million, or 8 cents per share, on sales of $4.8 billion for the quarter, compared with a loss of $268 million, or 4 cents per share, on sales of $4.5 billion in the same period a year earlier. Product sales increased nearly 10% to $4.0 billion, from $3.7 billion last year. The earnings included a $412 million charge to write down losses on publicly held equity securities and a $97 million expenditure to acquire AYR Networks Inc.

Still, Chambers was cautious about the outlook for upcoming quarters. He noted that the book-to-bill ratio in the first quarter was below 1.0, signaling slowing sales. And he could not say if Cisco's revenue growth was because of an improving economy or market-share gains at the expense of weaker competitors.

"CEOs are increasingly cautious about capital-expenditure spending and hiring until they see their own revenues and profits improve," Chambers says. "Their visibility, in terms of their own revenues and profits, is in a number of cases becoming more limited. Today's economy is a 'show-me' economy." While sales to retail, education, federal government, housing, and retail banking customers are up, Chambers says, orders from high-tech, energy, service-provider, hospitality, and investment-banking customers are declining.