It was a stronger quarter than usual, even for a reliable revenue machine like Cisco Systems (Nasdaq: CSCO).
After market close Tuesday, the networking equipment giant reported fiscal fourth quarter net income of $1.2 billion, or 16 cents per share, excluding special charges. First Call consensus predicted a profit of 15 cents per share for the quarter ended July 29.
Also Tuesday, Cisco said its executive vice president, Donald Listwin, would leave to join a start-up that Cisco has invested in. During Cisco's Tuesday afternoon conference call with analysts, Listwin said his new employer would be unveiled Wednesday.
Shares of Cisco rose to 67 15/16 in afterhours activity on the Island electronic communications network, following the earnings report. Cisco, which usually tops First Call predictions, closed Tuesday's regular trading at 65 1/2, down 3/4 for the session.
Including costs related to acquisition, taxes on stock option exercises and gains from minority investments, Cisco earned $796 million, or 11 cents per share.
Fourth quarter revenue increased to $5.72 billion, a 61 percent gain year-over-year, 16 percent improvement sequentially and higher than many analysts expected. It was the company's highest revenue growth quarter in four years, Chambers told analysts.
Routers and switches generated 81 percent of fourth quarter revenue. About 58 percent of Cisco's total revenue came from the Americas, followed by 25 percent from Europe, Africa and the Middle East, 10 percent from non-Japan Asia, and 7 percent from Japan.
"This is as good a theater and country balance performance as we've had in the last five years," Chambers said.
All product lines grew rapidly, even mature segments such as equipment for corporate networks, company executives said. "Most quarters even in very good times will not have this balance," Chambers said.
Enterprise revenue increased 45 percent year-over-year. Cisco boosted its already dominant market share in that field at least partly because of weaker competition, Chambers said.
3Com (Nasdaq: COMS) left the enteprise networking business during the second quarter of calendar 2000. Lucent Technologies (NYSE: LU) has been going through a reorganization.
Bookings in the fourth quarter increased 54 percent year-over-year, also the best quarter in four years for bookings growth, Chambers said.
Gross margins fell to 64 percent from 64.3 percent in the third quarter. The drop happened largely because Cisco increased sales of new products, such as optical and DSL equipment, executives said. Newer equipment typically sells for lower margins than more mature product lines in the networking space.
Those gross margins will fall 0.05 to 0.1 percent each quarter during the next fiscal year as sales of new products accelerate, executives said.
Cisco reported more than 40 percent sequential growth in the fourth quarter for DSL equipment. Optical networking revenue is on pace to break the $1 billion annual revenue mark, executives said.
For the full fiscal 2000, Cisco earned $3.91 billion, or 53 cents per share, not counting special charges. If all costs and gains are included, Cisco reported full year net income of $2.67 billion, or 36 cents per share, on revenue of $18.93 billion.
The company posted a pro forma profit of $727 million, or 21 cents per share, on sales of $3.55 billion in the fourth quarter a year ago. For the full fiscal 1999, Cisco reported a pro forma profit of $2.55 billion or 75 cents per share on revenues of $12.15 billion.
Analysts generally expected the company to meet fourth quarter earnings estimates or beat them by a penny per share. The biggest concern nowadays is that the company may not be able to keep its torrid growth rates going.
But company executives reiterated previous predictions that the network equipment industry would grow 30 to 50 percent in countries with strong economies. Cisco now believes industry growth will be in the high end of that range, Chambers said.
"It clearly is a more bullish message that we're sending for the next 12 months," he said.
• Can Cisco keep up the pace?>