Cisco meets Q4 expectations

Cisco Tuesday posted fourth quarter 2003 revenue and earnings in line with analyst expectations.

For the period ended July 26, 2003, Cisco recorded pro forma earnings of $1.1 billion, or $0.15 per share, on sales of $4.7 billion. Sales were down 2.6% from the same period a year ago but up from the $4.6 billion recorded for the third quarter of this fiscal year.

Pro forma earnings were flat with the third quarter and up from fiscal 2002’s fourth quarter result of $1 billion, or $.14 per share.

Net sales for fiscal 2003 were $18.9 billion, compared with $18.9 billion for fiscal 2002. Pro forma net income for the year was $4.3 billion, or $0.59 per share, compared with pro forma net income of $2.9 billion, or $0.39 per share, for fiscal 2002.

“We are pleased to report another solid quarter in a challenging market,” said John Chambers, Cisco president and CEO, in a statement. “In high-end routing and switching, we saw solid sequential growth. Advanced technologies in total exceeded 20%t sequential growth, with IP telephony, storage and optical growing the fastest in terms of orders.”

In high-end routing, orders for Cisco’s 12000 series Internet router grew to approximately $200 million during the fourth quarter, a sequential increase in excess of 25%. Orders from service providers were up over 5% but less than 10%.

Product revenue was $3.9 billion in the fourth quarter. Routers accounted for 26% of that, which was flat with the third quarter. Switch revenue was down 1% to 39% of total revenue.

Mid-range and low-end router revenue in the quarter was “disappointing,” Chambers said.

Access products were 5%, which was flat sequentially; “other” products — security, optical, software, IP telephony and Linksys home networking — were up 1% sequentially, to 12%. Services revenue was flat with the third quarter, at 18%.

Forty-seven percent of Cisco’s revenue was from the U.S., up from 45% in the third quarter. Cisco said total U.S. orders were better than expected, with enterprise beating expectations, service provider meeting expectations, and small/medium business orders increasing.

Orders for Cisco’s optical products in the fourth quarter reached a two-year high, Chambers said. Cisco also realized “double digit” growth in the U.S. federal government market with orders crossing the $1 billion threshold for the first time.

Cisco attained $400 million in service revenue in fiscal 2003. Services has the potential to be a $1 billion business for Cisco in three- to five years, Chambers said.

For the first quarter of fiscal 2004, Cisco expects revenue to grow 2% to 4% sequentially. Future earnings growth will be driven by top line revenue growth vs. cost cutting, Chambers said, adding that he was more optimistic and positive about internal and external factors that influence Cisco’s performance.