Chambers Points to U.S. Strength, Acquisition for Q3 Sales Growth

Cisco Systems Tuesday said continued strength in its U.S. business and a strong contribution from its recently closed acquisition of Scientific-Atlanta helped fuel revenue growth of 18 percent for its third quarter.

Nevertheless, the company reported a slight dip in profits due to the impact of stock-based compensation expenses and costs related to the acquisition.

U.S. product orders grew some 20 percent year-over-year for the second quarter in a row, said John Chambers, president and CEO of Cisco, San Jose, Calif., during a conference call. “When your largest geography representing almost half your business is doing well, the results are obvious,” he said. U.S. enterprise orders grew about 20 percent, while commercial orders grew in the high teens, he said.

Cisco closed its acquisition of Scientific-Atlanta during the quarter, which included two months of financial results from the cable equipment and set-top box vendor.

“The feedback from many of our global customers continues to be very positive regarding the Scientific-Atlanta and Cisco combination, with many of these customers saying Cisco is very well positioned in data, voice, and mobility coverage, and now we bring the final piece of the quadruple play with video leadership,” Chambers said.Cisco saw strong growth in several product areas during the quarter. Its switch business grew 13 percent year over year to $2.69 billion, while its router business grew 5 percent to $1.52 billion. Advanced technologies sales climbed 42 percent to $1.69 billion, including results from Scientific-Atlanta. Without the acquisition, advanced technologies sales grew 12 percent, driven by VoIP, wireless and storage.

For the quarter ended April 30, Cisco reported revenue of $7.32 billion, up from $6.19 billion in the same quarter a year ago. Scientific-Atlanta contributed sales of $407 million. Without that revenue, the company grew sales by 12 percent year-over-year, the high-end of its guidance, Chambers said.

Earnings for the quarter dropped slightly to $1.4 billion, or 22 cents per share, compared to $1.41 billion, or 21 cents per share, for the same quarter a year ago. Results for the quarter included the impact of stock-based compensation, which is not reflected in the year-ago figures.

Excluding charges, Cisco earned $1.8 billion, or 29 cents per share, compared to $1.5 billion, or 23 cents per share, a year ago. That beat financial analysts’ estimates of 26 cents per share, according to Thomson Financial/First Call.

For its fourth quarter, Cisco expects revenue growth of 18 percent to 21 percent year-over-year, including some $500 million in sales from Scientific-Atlanta. For fiscal 2006, the company expects sales to top $28 billion.0