February 04, 2004, 9:31 AM — Heralding improvement in the global economy, Cisco Systems Inc. on Tuesday reported US$1.3 billion net income or $0.18 earnings per share for the second quarter of its 2004 fiscal year, compared to $991 million or $0.14 per share in the same quarter of 2003.
The income, based on generally accepted accounting principles (GAAP), came on net sales of $5.4 billion and beat analysts' estimate of $0.17 per share, according to analysts surveyed by Thomson First Call. Its sales likewise beat the First Call estimate, which was $5.29 billion.
After an accounting change also using GAAP made on Jan. 24, the last day of the quarter, net income was $724 million or $0.10 earnings per share, the company said in a statement. As a result of the change, due to implementing a federal accounting rule, Cisco consolidated Andiamo Systems Inc. and recorded a non-cash cumulative stock compensation charge of $567 million, or $0.08 per share, according to the statement.
In the current fiscal quarter, Cisco expects revenue to rise 1 percent to 3 percent from the second quarter, the company said.
Executives grew more optimistic about the economic recovery during the second quarter, though caution remains, Cisco President and Chief Executive Officer John Chambers said in a conference call following the announcement.
"People are very careful about taking risks in today's environment. ... It's been three years of false starts," Chambers said. "It's a little bit more cautious environment than we've traditionally seen in a recovery."
More U.S. CEOs are optimistic about the global economy now than a quarter ago, though they remain cautious about capital expenditures and hiring, Chambers said. He highlighted good news from the company's large and closely watched U.S. enterprise equipment business: For the first time in two years, that segment has racked up two consecutive quarters of year-over-year revenue increases. In addition, service providers' investment in new equipment, especially outside the U.S., led to healthy sales gains, Chambers said.
Revenue from Cisco's "advanced technology" lineup also grew strongly, with one segment, security products, reaching a yearly revenue rate of about $1 billion, he said. It became the first of the advanced technology businesses to achieve that. The company's other new technology areas include IP (Internet Protocol) telephony, storage, home networking, optical equipment and wireless. A year earlier, new technologies had brought in just 10 percent of revenue. Revenue from Cisco's Linksys division, the home networking company it acquired last year, grew 39 percent from the previous quarter.
The breakdown by revenue of Cisco's businesses held fairly steady in the quarter, with routers making up 26 percent, switches 39 percent, services 16 percent, advanced technologies 15 percent and other products, including network management software, 4 percent.
The San Jose, California, company's product bookings came from roughly the same places as in the year-earlier quarter: 45 percent from the U.S., 30 percent from Europe, the Middle East and Africa, 12 percent from the Asia-Pacific region, 7 percent from Japan and 6 percent from other countries in the Americas.
Some product shipments were delayed early in the quarter because of problems with suppliers' ability to deliver components, but those have largely been resolved, executives said on the conference call.
