Update: Cisco posts revenue, profit gains for Q4

Cisco Systems on Tuesday reported gains in revenue and net income for both its fiscal fourth quarter and fiscal year 2005, which ended July 30.

Revenue hit a record $6.6 billion in the quarter, up more than 11 percent from the same quarter a year earlier, and its annual revenue came in at $24.8 billion, a 12.5 percent increase from fiscal 2004.

The dominant networking vendor's earnings were $0.24 per share, or $0.25 per share excluding certain items. It met financial analysts' expectations for both revenue and earnings per share excluding the special items. Analysts polled by Thomson First Call had estimated Cisco's fourth-quarter revenue at $6.56 billion and its earnings, excluding certain items, at $0.25 per share.

In a conference call following the earnings report, President and Chief Executive Officer John Chambers dismissed rumors that Cisco is seeking to buy Nokia Corp. or EMC Corp., without explicitly denying that Cisco planned to buy either company. The company's ideal acquisition target is a small, private company just beginning to earn revenue, he said.

"I was surprised the credibility the market gave to some of the recent rumors," Chambers said.

"It is extremely unlikely for us to do a large acquisition," he said, but pointed out that Cisco has formed partnerships with large vendors, including IBM Corp. and EMC.

Product orders grew across most product categories and geographic areas in the quarter, with the exception of Japan and China, Chambers said on the conference call. Weak capital spending brought orders down slightly in Japan compared with the year-earlier quarter, he said. In China, Cisco faces strong domestic competitors, Chambers said, with about 600 employees in the country versus 40,000 for one of its Chinese rivals. But the company had much better results in India, where orders grew 75 percent from a year earlier and 40 percent from the previous quarter, Chambers said.

Products for small and medium-sized businesses, which Cisco calls its commercial sector, was the brightest spot overall in the quarter, Chambers said. It has the best chance of being Cisco's fastest-growing market over the next five years, he said. Meanwhile, order growth was solid for enterprise and service-provider products in most areas.

While revenue from Cisco's traditional routing and switching products grew 3 percent and 8 percent respectively from a year earlier, the company's more recently introduced technologies had growth of 27 percent, Chambers said. Enterprise IP (Internet Protocol) communications, security and wireless LAN technologies led the way, with gains in home networking and storage as well. Optical network gear lagged behind, he said. Cisco will announce additional new-technology areas on a regular basis over the next 12 to 18 months, Chambers said.

Cisco's ISR (Integrated Services Router) products, designed for small and medium-sized businesses and branch offices and available with features such as VOIP (voice over IP) and security, continued to be one of the company's strongest products, Chambers said. Meanwhile, orders for the CRS-1 (Carrier Routing System-1), its next-generation core router, grew more than 150 percent from the third quarter, he said.