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Cisco Systems earns $7 million in fourth quarter

The Associated Press
Wednesday August 08, 2001

SAN JOSE — Cisco Systems Inc. earned a relatively paltry $7 million in its fiscal fourth quarter, meeting Wall Street’s expectations, as the networking giant continued to struggle with the global economic downturn. 

During a conference call to discuss the results, Cisco executives declined to offer specific long-term earnings guidance but added the industry has not yet turned around despite some signs of improvements in its U.S. businesses. 

“While we would like to say the bottom has been reached in our industry, we don’t think we are there yet,” said John Chambers, Cisco’s chief executive. “We are becoming cautiously optimistic that it may be achieved in the next one or two quarters in the U.S.” 

For the three months ended July 28, Cisco broke even on a per-share basis, a whopping 99 percent below the $796 million, or 11 cents per share, in the same period last year. 

Excluding items and goodwill, the company earned $163 million, or 2 cents per share, compared with $1.2 billion, or 16 cents per share, in the same period last year. 

Analysts were expecting a profit of 2 cents per share, according to a survey by Thomson Financial/First Call. 

Revenue for the fourth quarter was $4.30 billion, a 25 percent decrease from the $5.72 billion in the same period last year but on par with analysts’ expectations. 

Analysts were seeking guidance for any sign that Cisco in particular – and the telecommunications industry in general – might be bottoming out from its monthslong slide. 

“We don’t see any turnaround. We’re not at a bottom, and it’s going to take a couple quarters,” said Paul Sagawa, a Bernstein analyst. “From that perspective, we think Cisco’s guidance was right on.” 

Revenue for the first quarter of fiscal 2002 is expected to range from flat to down 5 percent compared with the fourth quarter, said Larry Carter, Cisco’s chief financial officer. The company offered no guidance for the new fiscal year. 

“We are seeing some signs of the U.S. stabilizing, but we are cautious about the overall economics and think Europe and Asia Pacific may get worse before they get better,” Chambers said. 

But Chambers remained optimistic about the long-term prospects for the networking industry. He said most of the chief executives of companies that buy Cisco equipment are still cautious but committed to the productivity improvements from networking. 

“As the economy ticks backs up, our view is that these CEOs will loosen the purse strings,” he said. 

Once the world’s most valuable company, Cisco fell hard as the demand for networking equipment has fallen sharply during the economic downturn. Customers from dot-coms to multinational voice and data carriers responded to the weak economy by postponing or outright canceling plans to buy more routers, switches and other networking equipment. 

To cope with the slowdown, Cisco has cut 8,500 workers and taken billions of dollars in inventory write-offs. Meanwhile, Cisco’s shares have fallen more than 75 percent since peaking at $82 in March 2000. 

Cisco, which acquired 71 companies between 1993 and December, recently started making purchases after a seven-month dry spell. Last month, Cisco announced plans to buy two small firms. 

“They were just trying to digest what they had, figure out what fit and what didn’t,” said Ray Hirsch, a senior analyst at American Express. “The fact that that’s starting to move forward suggests a little more confidence.” 

For its fiscal year, Cisco lost $1.01 billion, or 14 cents per share, compared with earnings of $2.67 billion, or 36 cents per share in the previous period. Revenue was $22.29 billion, an 18 percent increase over the $18.93 billion reported a year ago. 

Before the earnings news, shares of Cisco closed down 28 cents to $19.26 in trading on the Nasdaq Stock Market. In after-hours trading, shares fell to $18.92. 

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