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Networking demands keep Cisco strong

The data networking leader reports a 38 percent increase in profits for its fourth quarter, excluding charges related to acquisitions.

Data networking leader Cisco Systems reported a 38 percent increase in profits for its fourth quarter at the close of the market today, excluding charges related to acquisitions.

Cisco reported fourth-quarter earnings of $727 million, or 21 cents per share, beating analyst estimates by a penny, according to a consensus of analysts' estimates compiled by First Call. Quarterly revenue rose 48 percent to $3.55 billion.

Including charges related to acquisitions, Cisco reported earnings of $635 million, or 18 cents per share, for the fourth quarter. Cisco completed the acquisitions of Amteva Technologies, GeoTel Communications, Fibex Systems, and Sentient Networks during the quarter.

In the quarter, Cisco sold more equipment to telecommunications companies to update their networks for Internet and data traffic. The company also boosted sales to smaller businesses, one of the fastest growing networking markets.

"They're pretty much firing on all cylinders," said Michael Cristinziano, an analyst at Gerard Klauer Mattison, who rates Cisco shares "buy."

For the fiscal year, Cisco earned $2.55 billion, or 75 cents per share, on revenue of $12.15 billion.

"It was a very solid and well-balanced quarter and year," said John Chambers, chief executive of Cisco.

The end of Cisco's fiscal year follows the company announcement of a planned $1 billion investment in KPMG, a services and consulting firm, earlier this week. That move may have been a pre-emptive strike, given rival Lucent Technologies' merger with International Network Services (INS) earlier today.

Previously, INS had a strong relationship with Cisco. Chambers even admitted the firm was "primarily in Cisco accounts."

But the chief executive said observers should expect dramatic changes in Cisco's relationships with its services partners to pick up the slack following Lucent's recent move. Chambers said he "would be surprised" if the product mix used by INS's network consultants did not change as a result of Lucent's $3.7 billion purchase.

Separately, Cisco now has $10.1 billion in cash on hand and the company is currently generating about $400 million in cash per month, according to chief financial officer Larry Carter.

Bloomberg contributed to this report.