Cisco (CSCO) Posts 63% Rise in Earnings, Citing Strong Corporate Spending

Cisco Systems (Nasdaq: CSCO) posted better-than-expected third-quarter earnings, citing growing confidence among customers to spend in an economy perceived as recovering. Shares of Cisco dropped 2.1 per cent to $26.19 in after-hours trading.

“We witnessed a return to strong balanced growth across geographies, products and customer segments that we haven’t seen since before the global economic challenges began,” said Chief Executive Officer John Chamber in a prepared statement.

The world’s leader of computer networking equipment reported it earned a net profit of $2.2 billion, or 37 cents per share, in the quarter ended May 1, an increase from $1.3 billion, or 23 cents per share, for the equivalent quarter last year.

Excluding special items, Cisco earned 42 cents per share.

The San Jose, Calif.-based company, known for continually low-balling guidance, again beat the Street’s mean estimate of 39 cents.

Revenue reached $10.4 billion, up 27 per cent from last year’s third quarter revenue of $8.2 billion, also surpassing Cisco’s estimate of $10.3 billion.

Following rapid sales decline starting in late 2008, Cisco has recovered back to pre-crash levels as a rebound in corporate spending on its computer networking equipment gathers renewed strength. The company projects an annual revenue growth range of 12 per cent and 17 per cent.

Guidance from Chambers includes a continuation of another 25 to 28 per cent increase in the current quarter’s revenue from the equivalent quarter last year. This calculates to a revenue range for the fourth quarter of $10.7 billion and $10.9 billion.

Cisco, which ends its quarter one month after most companies, serves as an indicator of corporate and government spending levels, which, in the case of spending in the Euro zone, has not fallen during the Greek debt crisis contagion in the region.

With approximately 67,000 workers worldwide, Cisco said it hired a net 1,000 employees during the third quarter and expects to hire at a more rapid pace in coming months, reversing the 2,000 net layoffs at the company last year.

Cisco’s acquisition of Norwegian teleconferencing equipment supplier Tandberg ASA during the quarter will be fully accretive in the fourth quarter, said Chambers.

Chambers added that sales of its servers for data centers are going well, with the pace of sales estimated to reach $200 million annually. Cisco entered the data center server market last year in an effort to take market share from Hewlett-Packard Co. and IBM Corp.