Cisco's strong third-quarter results, announced Tuesday, reflect the company's best year-on-year growth in 3 years as well as the networking equipment vendor's 13th consecutive quarter of growth, according to Cisco.
For the three-month period ended April 29, Cisco's net sales rose 55.1% compared with the same quarter a year earlier to $4.92 billion, according to a statement by the company. With a variety of costs and charges factored in, the vendor's operating income was $744 million, down 13.2%, and net income advanced 4.1% to $662 million.
After one-time costs associated with research and development, taxes on stock options, acquisition-related costs and other similar charges were excluded, Cisco's operating income increased 49.3% to $1.31 billion and net income was 58.1% higher at $1.03 billion - the first time that figure has passed the billion dollar mark.
"Given our size and the fact that the third quarter has historically been our most challenging quarter, we were very pleased with the growth we saw," says John Chambers, Cisco's CEO and president, who spoke with reporters in a conference call. Growth was seen across the company's product sectors and geographic markets, according to Chambers.
Routers continued to contribute the most to Cisco's sales, representing 41% of all sales in the third quarter compared with 39% in the previous quarter. Revenue from switches - 39% - was unchanged; that from access products rose to 13%, up from 12%; and revenue from all other products decreased to 7%, down from 10%, Chambers says.
Sales into the enterprise sector led in terms of growth for the first time in a long time with quarter-on-quarter growth above 20%, Chambers says. Shining stars were the company's Catalyst 6000 and 4000 products, which saw growth of over 40%. In the service provider sector, growth was in the high teens, according to Chambers.
Around the world, Cisco says it saw strong growth in many markets, with Asia, excluding Japan, leading the way in terms of quarter-on-quarter growth of around 25%. Korea, India and Hong Kong led the growth in the region. In Japan, the company says it saw the first improvement in business for a few years, with growth exceeding 20%, although capital expenditure at Japanese companies is still sluggish, Cisco executives note.
Growth was even throughout all areas in the Americas, and the U.K. led the Europe, Middle East and Africa region. Cisco says it is optimistic about potential from growth in the region on the back of continuing privatization and deregulation in the European telecommunications market.
Among causes for concern going forward is the increasingly competitive environment in which Cisco operates, according to Chambers. "As expected, our toughest competition comes from the hundreds of start-ups and seemingly unlimited supply of venture capital to create competitors," he says. Chambers also notes that the level of competition is fierce not only in the networking market but also in the jobs market for the company's engineers.
Another worry for Cisco is an expected component shortage, which may last for several years and is increasingly likely to hit the vendor as it relies on smaller start-up companies for some components and increases sales, thus requiring larger quantities of components, according to Chambers.
Cisco, in San Jose, can be reached at 408-526-4000 or at www.cisco.com/.
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