Cisco's Q2 Revenue Grows on U.S. Strength, Profits Dip

By Jennifer Hagendorf Follett, CRN
February 07, 2006 5:45 PM ET

Strong order growth in the United States helped propel Cisco Systems sales during its second fiscal quarter, but earnings dipped slightly year-over-year due to stock option expenses.

“While there were a number of highlights, it was probably the U.S. that topped the highlight list with strong order growth of approximately 20 percent year over year,” said John Chambers, president and CEO of the San Jose, Calif.-based company during a conference call. “This is better order growth than we’ve experienced in the last six quarters in the U.S.,” he said.

For the quarter ended Jan. 28, Cisco reported earnings of $1.38 billion, or 22 cents per share, down from $1.4 billion, or 21 cents per share, for the same quarter a year ago.

The results included stock-based compensation expenses of $188 million, or 3 cents per share, which were not included in results prior to this fiscal year. Had stock options expenses been included in the year-ago quarter, earnings would have been $1.1 billion, or 17 cents per share.

Cisco’s pro forma earnings of $1.63 billion, or 26 cents per share, beat analysts’ estimates of 25 cents per share, as polled by Thomson Financial/First Call.

Revenue for the quarter rose to $6.63 billion, up more than 9 percent from $6.06 billion a year ago.

Router sales for the quarter hit $1.42 billion, up 7 percent year-over-year. Cisco’s Integrated Services Router line has now exceeded a $2 billion run rate, Chambers said.

Switch sales during the quarter were $2.67 billion, up 12 percent, while revenue from services grew 14 percent to $1.1 billion.

Sales from advanced technologies grew 5 percent to $1.28 billion, including sales in two new areas, hosted small business systems (Linksys One) and application networking services. Results from another new advanced technology, digital video, which will primarily reflect Cisco’s planned acquisition of Scientific Atlanta, are expected to be included in next quarter’s results.

In the U.S., year-over-year orders in advanced technologies grew some 20 percent, led by enterprise IP communications, wireless and storage, Chambers said.

Shares of Cisco closed up 26 cents at $18.09 prior to the announcement.

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