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Cisco earnings strong on sales jump

The networking equipment quiets rumors of a slowdown at the company, beating estimates by a penny on a 49-percent increase in sales.

Cisco Systems shares were up nearly 5 percent this morning following a healthy earnings report that quelled fears about a slowdown at the network equipment giant.

Shares of the company jumped at the market open, advancing 3.50, up nearly 5 percent at 77.75.

Cisco yesterday beat earnings estimates by a penny on a 49-percent increase in sales.

The firm earned $837 million, or 24 cents per share, excluding in-process research and development costs from acquisitions for its fiscal first quarter. Also excluding costs, Cisco earned $561 million, or 17 cents per share, a year ago.

Revenue rose to $3.88 billion from $2.6 billion a year ago.

Consensus analyst estimates pegged Cisco's earnings at 23 cents per share, according to First Call.

Rumors circulated on Wall Street last month that Cisco would not meet expectations because of slow sales, attributed in part to the implications of Y2K on its business.

Company executives said Cisco experienced strong growth across all of its businesses, including its enterprise, service provider, and small and medium business segments. That resulted in 9 percent sequential growth over the previous period. "It was a solid quarter," John Chambers, Cisco chief executive, said.

Including costs, Cisco earned $438 million, or 13 cents a share, compared to $512 million, or 15 cents, a year ago.

Cisco took charges related to completion of the acquisitions of Monterey Networks and MaxComm Technologies during the quarter. The company also closed deals for StratumOne Communications, TransMedia Communications, and Cocom A/S.

Though Chambers said Cisco would continue to use acquisitions as part of its core strategy, he noted that two-thirds of the company's research and development comes from inside the company.

Cisco's chief also said the company is "slightly more optimistic" on the affects that Y2K could have on its business, as corporations and communications companies prepare for glitches related to the calendar change. "Our guidance on Y2K has not changed dramatically," he said.

Chambers did say spending among financial institutions and corporate enterprise accounts will be more "difficult to forecast" due to Y2K and called the company's next quarter a "wild card."

Competitor Nortel Networks attempted to steal some thunder today when it announced its intentions to slash prices on its own routing technology---a segment Cisco dominates---and offer its networking software to third parties.

But Cisco executives downplayed Nortel's strategy as "sleeves on a vest."

"I really don't see it as having a big impact," said Don Listwin, Cisco's executive vice president.

Earlier in the day, Cisco announced the purchase of wireless equipment firm Aironet Wireless Communications for nearly $800 million in stock.