Computer network giant Cisco Systems beat most forecasts last night, reporting a 16% jump in quarterly profits from a year ago to $1.4 billion.
The company, which makes the equipment directing much of the world's Internet traffic, said the profit for the fiscal third quarter ended April 30 amounted to 23 cents per share, excluding one-time costs, a cent better than the average Wall Street estimate. Revenues grew 10.1% on a year-over-year basis, to $6.2 billion.
The world's biggest maker of networking gear held costs in check and sold more of its equipment to large corporations and consumers. 'Today's results are a clear indication that our integrated technology strategy is working - customers are realizing the benefits of an intelligent network architecture,' said John Chambers, Cisco's president and chief executive.
'The long-term momentum we are seeing across product families, geographies and market segments clearly points to Cisco's strong competitive advantage', he added.
Cisco is benefiting as corporate customers, who contribute the bulk of the company's revenue, upgrade to data networks that are more secure and easier to manage.
Cisco is also selling more of its low-cost wireless Internet gear used by consumers and small businesses. But while surging sales of those products are good for the top line, they are not so good for profitability, because that gear carries much lower margins.
Cisco's gross margin, or the percentage of revenue left after deducting product costs, narrowed to 66.8% of sales from 68.8% a year ago.
To maintain profitability, Cisco is running its business more efficiently. Its operating expenses were flat compared with a year ago, even as it boosted sales. Cisco is also getting a lift from greater use of equipment for voice over Internet (VoIP) for Internet telephony, and increased usage of mobile computers that connect to the Internet through wireless networks (WLANs).
