Cisco sees 'dramatic' sales improvement in 2Q

Posted February 3, 2010 4:17 p.m. EST
Updated February 3, 2010 6:37 p.m. EST

— Cisco Systems Inc. blew past its own forecast for the latest quarter, reporting its first sales increase in a year as it left the recession behind.

Improvement was dramatic “across the board” and provides “a clear indication that we are entering the second phase of the economic recovery,” CEO John Chambers said in a statement Wednesday.

The company also provided an outlook for the current quarter that was far above analyst expectations.

Because Cisco is the world’s largest maker of computer networking equipment, its sales are seen as a bellwether of technology spending by large corporations, government agencies and telecommunications service providers around the world.

Cisco employs about 4,000 at its Research Triangle Park campus.

Earnings were $1.9 billion, or 32 cents per share, up 23 percent from $1.5 billion, or 26 cents per share, a year ago. Excluding one-time charges, Cisco earned 40 cents per share. Analysts polled by Thomson Reuters expected 35 cents per share.

Revenue grew 8 percent to $9.8 billion.

For the fiscal second quarter, which ended Jan. 23, the company had forecast a 1 percent to 4 percent sales increase, the first such year-over-year sales increase in a year. That’s in contrast with two quarters earlier, its worst of the recent recession, when sales were down 18 percent.

For the current quarter, which ends in April, Chambers said Cisco expects a sales increase of 23 percent to 26 percent from the same quarter last year. That works out to $10 billion to $10.3 billion. Analysts were expecting $9.5 billion.

Investors cheered the outlook. Shares of Cisco, which is based in San Jose, Calif., rose 83 cents, or 3.6 percent, to $23.90 in extended trading, after Chambers announced the forecast on a conference call. Before the release of results, shares closed up 5 cents at $23.07.

Despite the sales drop, Cisco’s high profit margin and huge cash hoard let it power through the recession in relative serenity, though it did lay off about 2,000 employees. It even made a string of multi-billion-dollar acquisitions.

“We are confident that our aggressive strategy of investing in the business during the downturn … are driving our momentum and growth in the market,” Chambers said.

He now expects the company to hire a net 2,000 to 3,000 people over the next few quarters.