Cisco Catches Telecom Flu

Communications Today, Feb 8, 2001

By Rodney L. Pringle, rpringle@phillips.com

Cisco Systems' [CISO] shares dropped as much as 13 percent yesterday, a day after the computer equipment-maker reported fiscal 2001 second-quarter results that didn't meet Wall Street expectations and warned that revenue likely won't grow for the next six months.

The company blamed the slowing telecom sector and a sharp economic downturn for its woeful results, which marked the first time in almost seven years that Cisco didn't meet analysts' expectations.

"We remain confident about the market opportunity ahead of us over the next three to five years," said John Chambers, Cisco president and CEO, in a statement. "This confidence is based on the continued impact of the Internet on productivity."

On Tuesday, Cisco reported net income of $874 million, or 12 cents a share, for the three months ending Jan. 27, 2001. The net income was up 7 percent from $816 million, or 11 cents a share, during the same period in 2000. Analysts surveyed by First Call/Thomson Financial had expected Cisco to earn 19 cents a share.

Revenue climbed a remarkable 55 percent to $6.75 billion during this year's second quarter compared to $4.26 million during the same period last year. However, that number also was below First Call's consensus revenue estimate for this year's second quarter of $7.1 billion.