Pointing to possible signs of a recovery in the battered market for networking equipment, Cisco Systems Inc. Tuesday reported a two percent increase in revenue for its third fiscal quarter and saw its pro forma earnings per share nearly triple compared to the same quarter last year.
Net sales for the third quarter ended April 27 were US$4.82 billion, compared to $4.73 billion in the third quarter of 2001, the company said in a statement released after the close of market.
Pro forma net income, excluding charges for acquisitions, payroll tax and certain one-time charges, was $838 million or $0.11 per share, compared to net income of $230 million or $0.03 per share for the third quarter 2001.
A consensus of analysts expected Cisco to post pro forma earnings of $0.09 per share on revenue of $4.87 billion, according to Thomson Financial/First Call.
Cisco Chief Executive Officer John Chambers called the quarter a "home run" in a statement accompanying Cisco's results. However, because Cisco gained market share during the quarter, Chambers said Cisco's year-over-year growth could not be used as evidence of an overall market rebound.
"We can't tell if our growth is due to market share gains or a turnaround," he said in a conference call with analysts late Tuesday.
In results based on GAAP (generally accepted accounting principles), the company reported net income of $729 million or $0.10 per share, compared with a net loss of $2.7 billion or $0.37 per share for the comparable quarter last year.
Looking ahead to the fourth quarter, analysts expect the company to earn $0.10 per share on revenue of $5 billion, according to Thomson Financial/First Call. Chambers estimated that fourth fiscal quarter revenue would be flat compared to the third fiscal quarter, or up slightly in the low single-digits. Orders are expected to be up about 5 percent, he said.
"Visibility remains limited. ... This should come as no surprise given that our customers visibility is limited," he said.
While he would not offer projections for the entire networking equipment sector, Chambers did note that it will show a "slight lag time" compared to an overall turnaround in IT spending.
The company is monitoring key metrics such as growth in manufacturing, which is beginning to rebound in Europe and the U.S., he said. Worker productivity is also a major driver, he said, adding that as government and enterprise customers realize the benefits of the Internet on productivity they will boost their investments in backbone equipment.
Areas where Cisco may see continued growth in revenue and net income include IP telephony, storage, wireless equipment, security and the integration of voice and data in the cable industry. Market segments that continue to plague the networking equipment industry include high-end routers and optical networking equipment. Cisco experienced a nearly 10 percent decrease in its orders for high-end routers and an even larger decrease for optical equipment, Chambers said.
A breakdown of Cisco's third fiscal quarter product bookings by region, which includes all orders taken during the quarter even if they hadn't yet been shipped, showed U.S. customers leading the way. The U.S. accounted for 43 percent of bookings. Europe, Middle East and Africa accounted for 32 percent, while product bookings in Canada and Latin America accounted for 6 percent of the total. Asia Pacific garnered 10 percent and Japan accounted for 9 percent.