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Cisco posts stronger-than-expected quarterly profit

Cisco Systems Inc posted a ­stronger-than-expected quarterly profit and signaled that recovery was well on its way, as businesses are investing in network equipment again after cutting back for the past year.

Chief executive John Chambers gave a revenue forecast for the current quarter, its fiscal second, that topped Wall Street expectations and said that business conditions had hit bottom at least six months ago. Shares of Cisco rose 3.7 percent.

“Q4 fiscal 09, as we indicated in last quarter’s conference call, looking back, was clearly the tipping point,” Chambers told analysts on a conference call on Wednesday.

Cisco also said its board of directors authorized up to US$10 billion in additional share repurchases, bringing its total outstanding repurchasing program to around US$13.1 billion.

Cisco is the world’s top vendor of routers, switches and other network equipment used by global businesses, including phone companies as well as governments.

Many of those customers had put off large investment decisions during the recession, but analysts have said many were beginning to shift gears toward more spending to cope with growing Internet traffic.

Revenue in its fiscal first quarter, which ended on Oct. 24, fell 13 percent from a year earlier to US$9 billion. But that was up 6 percent ­quarter-on-quarter, and higher than the average Wall Street ­forecast of US$8.7 billion, Thomson Reuters I/B/E/S said.

The company forecast fiscal second quarter revenue to increase between 1 percent and 4 percent from a year earlier, or a rise of between 2 percent and 5 percent compared to the first quarter.

The average Wall Street estimate for the second quarter had implied a revenue decline of 1.3 percent year on year.

“It’s better than expected. On first blush, it’s very good news, and will be good for the market, but we need to hear what they say about capital spending,” said Jim Awad, managing director at Zephyr Management.

Net profit was US$1.8 billion, or US$0.30 a share, compared with US$2.2 billion, or US$0.37 a share, a year earlier.

Excluding items, profit was US$0.36 a share compared to US$0.42 a share a year earlier, and higher than the average Wall Street forecast of US$0.31.
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