February 8, 2000 4:40 PM PST

Cisco exceeds analyst expectations

Cisco Systems today reported that second-quarter earnings increased 49 percent, exceeding analyst expectations by a cent as revenues from Internet service providers and telecommunications firms soared.

The company's board of directors authorized a 2-for-1 stock split at the close of the market, its ninth split since the company went public in 1990.

Net earnings for the period were $906 million, or 25 cents per share, on revenues of $4.35 billion, excluding one-time charges. That compares with earnings of $609 million, or 17 cents per share, on revenues of $2.85 billion in the same period in 1999. Sales increased 53 percent over the same period a year ago.

Analysts expected Cisco to earn 24 cents per share, according to a survey by First Call. That estimate was revised upward from 23 cents on Feb. 4.

Including one-time charges, Cisco posted earnings of $825 million, or 23 cents per share.

At 1 p.m. PST, the close of regular market trading, Cisco shares were up 63 cents to $125.81. In after-hours trading, Cisco shares were up approximately 8 points. The earnings report was issued after the close of regular trading.

Cisco chief John Chambers attributed the growth to the continued interest in networking, as more businesses and countries get online. "The momentum of the Internet revolution continues to accelerate across both business and government sectors on a worldwide basis," Chambers said in a statement.

The company experienced approximately 80 percent year-over-year quarterly growth in its sales to service providers.

Compared to the same period a year ago, revenue from routing devices---Cisco's bread-and-butter---grew 31 percent, sales of switching gear grew 43 percent and sales of network access equipment grew 98 percent.

Cisco chief financial officer Larry Carter said the company was coming in "at or above expectations" in all geographic areas.

Executives said the firm booked $100 million in revenue for the quarter from a high-profile set of recent acquisitions that include Cerent, Monterey Networks and PipeLinks. Those firms have formed the basis of the company's optical networking strategy, one of the hottest niches in the networking industry.

The company's recent $2.15 billion deal for Italian giant Pirelli's optical systems business is not included in that figure.

Cisco executive vice president Don Listwin said the challenge for the optical business is to expand its capacity to meet the "demand and velocity" of the market opportunity. Added Chambers: "Our demand has dramatically exceeded our expectations. We are dealing with some supply issues here. The momentum is excellent."

Chambers said the supply problem should be taken care of in the current quarter.

The Year 2000 issue, which the company once characterized as a "wild card," turned out to be a "minor event," according to Chambers.

Of his competitors, particularly Nortel Networks and Lucent Technologies, Chambers said the former is "stepping up to the plate very well," while the latter has fallen off in the past couple of months.

Cisco's latest split will include all shareholders of record as of Feb. 22 and will be distributed March 22.

 

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