Cisco quarterly results soar past estimates

NEW YORK Wed Feb 3, 2010 5:36pm EST

A pedestrian walks past the Cisco logo at the technology company's campus in San Jose, California February 3, 2010. REUTERS/Robert Galbraith

A pedestrian walks past the Cisco logo at the technology company's campus in San Jose, California February 3, 2010.

Credit: Reuters/Robert Galbraith

NEW YORK (Reuters) - Cisco Systems Inc's results and outlook soared past expectations and Chief Executive John Chambers said business has improved dramatically in nearly all areas.

The leading maker of network equipment, whose shares rose 4 percent, expects to hire 2,000 to 3,000 people in the next several quarters, Chambers said in another sign of his confidence in the economic recovery.

Cisco forecast revenue growth accelerating to a range of 23 percent to 26 percent in the current quarter, against the average Wall Street forecast for an increase of 16.5 percent year on year.

"During the quarter we saw dramatic across-the-board acceleration and sequential improvement in our business in almost all areas," Chambers said in a statement.

As the economy improved, Cisco's customers have resumed upgrading their networks to handle growing Web traffic, boosting sales of the company's routers, switches and other equipment that support wireless and Internet use.

Chambers said results for the fiscal second quarter ended January 23 were "remarkably well-balanced" between products and geographies, indicating a solid recovery was underway.

Cisco is one of the first major technology companies to report results that include much of January 2010. Its performance and outlook are an indicator for the rest of the technology sector, especially in enterprise spending.

Revenue for the quarter rose 8 percent to $9.8 billion, marking the first year-on-year growth that Cisco has reported since the quarter ended October 2008. Analysts, on average, had expected $9.4 billion, according to Thomson Reuters I/B/E/S.

Profit rose to $1.9 billion, or 32 cents a share, from $1.5 billion, or 26 cents a share, in the year-ago quarter. Earnings excluding special items rose to 40 cents from 32 cents, beating Wall Street's average forecast of 35 cents.

"The results were very strong, better than we were looking for, and an incremental improvement from the last quarter when they noted their visibility into the second half of the fiscal year was limited and they didn't want to suggest a recovery was under way," said Erik Suppiger, analyst at Signal Hill Group.

Chambers said on a conference call that "based upon our business momentum and prior economic recoveries, this would indicate that the recovery from a capital spending perspective is very strong, and moving into the second phase of reasonably balanced, across-the-board growth."

A year ago, Cisco had been reporting disappointing revenue and job cuts, stoking fears of a 2001-style freeze in technology spending. Yet, results over the past year have shown cutbacks were not so drastic, as companies were not as over-invested in network equipment as they were a decade ago.

While phone service providers and large corporations did indeed trim spending in 2009, many have recently resumed spending as the popularity of smartphones like Apple Inc's iPhone and increasing use of online video continue driving Internet traffic.

Cisco shares rose to $24.03 in extended trading, after ending 0.2 percent higher at $23.07 on Nasdaq.

(Reporting by Ritsuko Ando; Additional reporting by Sue Zeidler and Ian Sherr; Editing by Richard Chang and Tiffany Wu)

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