Cisco Profits Up, Outlook Down

Cisco Systems Inc. (Nasdaq: CSCO) reported higher profits but lower sales for its fiscal second quarter. The company also had a subdued outlook for its next quarter, but it pointed to hopes for growth in storage networking market (see Cisco Posts Q2 Profit).

The company reported net income of $991 million, or 14 cents per share, for its fiscal 2003 second quarter, ending Jan. 25. This compared with earnings of $660 million, or 9 cents a share, in the year-ago quarter. It logged $4.7 billion in revenue in the second fiscal quarter, down from $4.8 billion a year earlier and also down from the $4.8 billion it reported in the first fiscal quarter.

Analysts expected net income of 13 cents per share and revenues of $4.73 billion, according to First Call. Excluding one-time charges and profits, it earned 15 cents a share, compared with 9 cents last year.

Cisco CEO John Chambers had a subdued outlook for the company's next fiscal quarter of 2003, saying that the company expected sales to be "flat to slightly down." The company qualified "slightly" as meaning sales could decline 2 percent to 3 percent.

"We are seeing even more conservative attitudes than a quarter ago," said Chambers. "There was a little more weakness in the first few weeks of January than we expected."Overall, Cisco executives are looking for growth in the wireless networking and storage networking areas, but they continue to have a conservative outlook for the wireline service provider market.

Chambers specifically said the storage networking could have the "most excitement," pointing to new reseller agreements with Hewlett-Packard Co. (NYSE: HPQ) and IBM Corp. (NYSE: IBM) for its MDS 9000 series storage switches, developed by in-house Cisco startup Andiamo Systems Inc. (see Cisco Buys Andiamo, IBM Tells Cisco: 'Let's Go!', HP Refills Its SAN Flask, and our interview with Soni Jiandani, VP Marketing, Storage Tech Group, Cisco