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Updated: Cisco delivers predictably strong 1Q earnings

Cisco Systems Inc. (Nasdaq: CSCO) cruised past analysts' estimates in its first quarter and sees no change in previously stated expectations for the second quarter.

According to first quarter results released Tuesday, Cisco pocketed first quarter net income of $837 million, or 24 cents a share, on sales of $3.88 billion.

First Call consensus expected the world's largest network-equipment provider to earn 23 cents a share.

Its shares closed off 1 1/16 to 74 1/4 ahead of the earnings report but quickly scampered up to 76 5/8 in after-hours trading.

The $3.88 billion in sales represents a remarkable 49 percent improvement compared to the year-ago quarter when it earned $561 million, or 17 cents a share, on sales of $2.6 billion. "We are very pleased with the Q1 results," Cisco CEO John Chambers said, during a conference call with analysts.

Cisco's guidance for the second quarter remains unchanged, with relatively few customers freezing spending because of Y2K fears, Chambers said. "Let me be very clear -- our guidance on Y2K has not changed dramatically," he said. "If anything, we have clearer visibility and slightly more optimism. ... While Q2 is a wild card ... we are still optimistic about the next several years for our industry."

Earlier in the day, Cisco said it would buy Aironet Wireless Communications Inc. (Nasdaq: AIRO), a provider of high-speed wireless data transmission products.

Including the write-off of purchased in-process R&D and the amortization of goodwill and purchased intangibles from several acquisitions in the quarter, Cisco earned $438 million, or 13 cents a share in the quarter.

A couple weeks ago, Wall Street was concerned that Cisco might actually preannounce lower-than-expected sales and earnings due to increased Y2K spending by large corporate customers. Analysts said those concerns are responsible for the stock's seesaw performance in the past few weeks.

"This is a nasty industry and if you're short selling the stock, it makes sense that you'd want people to believe Cisco isn't going to make their numbers," said George Hunt, an analyst at Wachovia Securities. "The first quarter is usually the toughest for telecommunications companies but obviously it didn't amount to anything."

Ahead of the earnings report, Hunt predicted Cisco would earn 23 cents a share on sales of $3.79 billion.

"Cisco continues to lead this industry and will for the foreseeable future," Hunt said. "I've got a "strong buy" rating on the stock and a 12-month price target of $90 a share."

Last quarter, Cisco hurdled analysts' estimates, earning $727 million, or 21 cents a share, on sales of $3.55 billion.

First Call consensus predicts it will earn 98 cents a share in fiscal 2000.

The stock moved up to a 52-week high of 75 15/16 earlier this month after trading at a low of 32 1/8 last November. In between, it split 2-for-1 in June.

Thirty-six of the 37 analysts following the stock maintain either a "buy" or "strong buy" recommendation.

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