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Cisco Systems posts third-quarter profit

Cisco Systems Inc, the world's largest maker of equipment to link computers, earned US$729 million in the fiscal third quarter. The shares rose 12 percent as profit exceeded forecasts and Cisco tried to allay debt concerns.

Net income in the period ended April 27 was US$0.10 a share, compared with a year-earlier loss of US$2.69 billion, or US$0.37, the company said in a statement. Sales rose 2 percent to US$4.82 billion from US$4.73 billion, the first year-over-year increase in five quarters.

While Cisco's revenue rebounded faster than its rivals, the shares had fallen 28 percent this year on concern that a recovery won't come as soon as previously anticipated. Chief Executive John Chambers, who cut jobs and expenses over the past year, said it still was difficult to forecast sales beyond the current period.

"If Cisco can keep putting up these numbers consistently, quarter after quarter after quarter, that will help improve" the share price, said Christian Koch, senior technology analyst at Trusco Capital Management. The firm oversees US$50 billion and holds 4 million Cisco shares.

Shares of the San Jose, California-based company climbed US$1.62 to US$14.70 in after-hours trading following the report that profit, excluding some expenses, exceeded forecasts. Earlier, the shares rose US$0.19 to US$13.08 on the NASDAQ Stock Market.

On a conference call, Chambers told investors and analysts that a recovery in computer-related spending by large organizations may not come quickly.

"At the present time, the vast majority of our enterprise customers have very tight control on their capital spending," Chambers said. "Visibility remains limited."

The company's per-share profit, excluding costs from job reductions, acquisitions and excess inventory, rose to US$0.11 from US$0.03 a year earlier. That topped the average estimate of US$0.09 a share from analysts polled by Thomson Financial/First Call.

Chief Financial Officer Larry Carter said on a conference call that the company, in an unexpected move, is paying US$1.9 billion to buy properties and end so-called synthetic leases.

Cisco is seeking to reduce investor concern about debt that's not on its balance sheet, Carter said. In a synthetic lease, companies transfer ownership of a property to another entity, then lease it back. Cisco has no debt on its balance sheet.
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