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Cisco turns up profits despite set top box buy

Sales rise set to cheer investors

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Cisco brought a little sunshine to an often dreary summer earnings season with its fourth quarter results.

Revenues reached $7.98bn, up from $6.58bn for the same period a year ago. Analysts were expecting a lower haul of $7.92bn. The Q3 acquisition of Scientific-Atlanta, which gave it a tasty slice of the burgeoning set-top box market, contributed $582m to the 2006 figure.

Operating profit fell marginally, from $1.997bn in Q4 2005 to $1.990bn this year.

But after expenses and taxes the income picture was reversed. In the three months to 29 July, net income crept up $4m to $1.54bn.

The seemingly flat figures obscure a positive picture, with the costs of the Scientific-Atlanta buy and employee stock options failing to dent income thanks to the higher than expected sales.

For the full year, sales rose to $28.48bn from $24.8bn in the preceding 12 months, although net profit dipped to $5.58bn from $5.74bn.

CEO John Chambers said: "From a Cisco standalone customer segment perspective we saw continued strength in the commercial market, with product order growth of approximately 20 per cent year-over-year. Scientific Atlanta was above the high end of our guidance with approximately 15 per cent growth year-over-year."

The results look set to be warmly received on Wall Street, with Cisco's stock up more than 10 per cent on pre-market trading on the INET electronic exchange. Cisco's full report is here.

Brocade, Cisco's rival in the storage switch sector, saw its $713m purchase of McData get a chillier response. Its shares slid more than 18 per cent yesterday on fears it had paid over-the-odds in a bid to repel Cisco's challenge. ®

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