Chambers Cautious Despite Earnings Report

Cisco posted revenue of $4.8 billion for its fourth quarter ended July 27, up 12 percent from sales of $4.3 billion in same period last year.

Cisco's earnings per share for the quarter beat street estimates by 2 cents per share. Pro forma net income for the quarter, which excludes charges, was $1 billion, or 14 cents per share, compared with pro forma net income of $163 million, or 2 cents per share, for the fourth quarter of 2001.

Analysts expected earnings excluding charges of 12 cents per share, according to Thomson First Call.

Income for the quarter under generally accepted accounting principles (GAAP) was $772 million, or 10 cents per share, compared with GAAP income of $7 million, or 0 cents per share for the same quarter in 2001.

The company finished the quarter with $21.5 billion in cash.

"Given a very challenging market, [the fourth quarter was a very solid quarter," Chambers said on a conference call with financial analysts Tuesday. The company's financial performance in the fourth quarter compared with that of the height of the late 1990s boom, he said.

Still, Chambers projected that sales for the current quarter would be flat or up slightly vs. the fourth quarter.

Chambers said he is "a little bit more cautious" about the state of the economy going into Cisco's fiscal 2003 first quarter than he was going into the fourth quarter.

The slowdown in service provider spending could last several more quarters, Chambers said.

"No one can say when the economy is going to turn around," Chambers said. "Our visibility remains limited because our customers' visibility remains limited."

The SMB and enterprise markets showed strong growth in the fourth quarter, with a sales percentage increase in the mid-teens over the third quarter, Chambers said.

The retail, education, federal government and retail banking markets showed improvement in the quarter, Chambers said. The investment banking, energy, high technology and service provider markets showed continued slowness, he said.

Chambers said he is confident that Cisco is doing everything it can to improve profits and productivity and is well-positioned for when the economy turns around.

Cisco CFO Larry Carter said the board has increased the company's stock repurchase program to a total of up to $8 billion through Sept. 12, 2003, an increase of $5 billion from the original $3 billion authorized in September 2001. To date, the company has repurchased about $2 billion worth of shares, Carter said on the call.

Cisco executives also used the Tuesday conference call to dispel rumors that have been floating in the past week. Many of the rumors predicted that Chambers or Carter would leave the company rather than sign off on the company's financials for the SEC.

"We stand behind our filings," Carter said on the call. "We fully intend to comply and sign it," Carter said in response to the new SEC requirement that executives of the largest 948 companies sign off on their companies' financial statements.

Carter did use the call to announce that plans to retire in May 2003, on his 60th birthday. Dennis Powell, Cisco vice president of corporate finance, has been designated to replace Carter as CFO when Carter retires.

As for Chambers' retirement, "I'm not even thinking about it," he said. "I have no intention of leaving Cisco. I love it here. I plan to work here for quite a while."