SAN FRANCISCO (MarketWatch) -- Cisco Systems Inc. reported late Wednesday a fiscal first-quarter profit that climbed 28%, as demand for Cisco's networking gear surged among telecommunication providers.
The results topped the expectations of Wall Street analysts and sent Cisco's shares up as much as 8% in after-hours trading.
San Jose, Calif.-based Cisco said net income for the fiscal first quarter ended in October rose to $1.61 billion, or 26 cents a share, from $1.26 billion, or 20 cents, a year earlier.
The company said it earned 31 cents a share excluding option expenses and other costs, up from 25 cents a year ago and more than the 29 cents analysts expected.
Sales rose 25% to $8.18 billion, also more than expected. Revenue was boosted by Cisco's acquisition earlier this year of cable-equipment maker Scientific-Atlanta, which contributed $584 million in quarterly sales. Excluding Scientific-Atlanta, sales rose 16%.
The No. 1 maker of Internet equipment, Cisco is selling more to phone companies and cable providers that are racing to upgrade their networks to offer high-speed video and other services.
"Cisco is like an arms supplier to both sides of a war," said Frank Husic, chief investment officer of Husic Capital Management in San Francisco, which owns Cisco shares.
Cisco's corporate customers also are upgrading their data networks to boost security and reduce costs by using the Internet to make long distance calls.
The company received 45% of its quarterly revenue from large corporate customers, while telecom providers contributed nearly 25% of sales and small-to-mid-sized businesses kicked in roughly the same share, Cisco Chief Executive John Chambers said on a conference call.
Orders from Internet service providers rose 23% from a year ago, Chambers said, while revenue from that market segment rose almost as fast. Orders for Cisco's most powerful router rose more than fivefold.
Another bullish forecast
Chambers forecast that sales in the current quarter ending in January would rise between 24% and 25% from a year earlier, including sales of Scientific-Atlanta gear, or between 14% and 15% excluding those sales.
Analysts were expecting sales growth of 21%, on average.
"Our momentum remains strong," Chambers said.
The forecast helped propel Cisco's shares as high as $27.23 in after-hours trading. The shares (CSCO :
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![]() CSCO25.10, +0.26, +1.0% ) closed at a multi-year high of $25.10 Wednesday, the latest in a series of gains that have propelled the stock to its highest level since early 2004. The stock is up more than 45% this year, with nearly all of that gain coming since August, when Cisco executives issued a bullish sales forecast for the fiscal year ending in July 2007.
Chief Financial Officer Dennis Powell forecast that Cisco's gross margin, or the percentage of revenue left after subtracting manufacturing costs, will be "slightly above or below 65%" in the current quarter. Operating expenses will be 36% of sales and Cisco's tax rate will be 26%, Powell forecast.
Cisco's per-share earnings in the October quarter were boosted by its massive stock buyback program, which lowered its number of shares outstanding. The company spent $1.5 billion repurchasing its own shares and has now spent almost $37 billion on such buybacks, in aggregate.
Sales of Cisco's Internet routers rose 13% from a year earlier, while data-switch revenue climbed 15% and sales of what the company calls advanced technologies rose 23%.
Among its advanced technologies, sales of wireless gear and Internet-based phone equipment "led the way," Chambers said.
Powell said Cisco hired more than 1,900 new employees during the quarter, more than some Wall Street analysts expected.
The company is expanding its international sales force, an investment that has begun to pay dividends.
Orders in emerging markets rose more than 40% from a year earlier, Chambers said, while U.S. orders climbed "in the upper teens" and European orders rose a "double-digit" percentage.
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