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Cisco profit up 76% to record

Calif. giant beats forecasts in 3d quarter

WASHINGTON -- Cisco Systems Inc., the world's largest maker of equipment to link computers, said first-quarter profit rose 76 percent to a record on the strongest demand in more than two years. The shares gained after sales beat analysts' forecasts.

Net income for the quarter ended Oct. 25 rose to $1.09 billion, or 15 cents a share, from $618 million, or 8 cents, a year earlier, when San Jose, Calif.-based Cisco recorded a loss on investments. Sales rose 5.3 percent to $5.1 billion, the highest since the second quarter of fiscal 2001.

"They do have the ability to grow faster than expected, and I think it does show that the economy is picking up," said Phil Lorenz, an analyst at Northern Trust Corp., which manages $435.7 billion and held 99.3 million Cisco shares as of June.

Demand from telecommunications companies rose 10 percent from the fourth quarter and orders from other US companies are likely to rise, chief executive John Chambers told analysts on a conference call. Some US chief executives see "wind at their backs," he said. Cisco's sales rose in the period for the first time in four quarters on "strength" in Cisco's routing and switching businesses, where demand has lagged.

Revenue for the current quarter may rise 10 percent from $4.71 billion a year ago, chief financial officer Dennis Powell said on the call. Costs from the company's purchase of Andiamo Systems Inc. and other expenses will cut second-quarter net income by 5 cents to 9 cents a share, he said. Profit of 17 cents a share before some expenses beat the average 15-cent forecast of analysts surveyed by Thomson Financial. Cisco had $97 million of expenses related to acquired assets and stock compensation.

Analysts polled had expected revenue of $4.86 billion. Sales of products in the quarter rose to $4.26 billion from $4.1 billion in the prior year. Revenue from services increased to $838 million from $832 million. Revenue was $4.85 billion in the same period a year earlier.

Cisco shares rose to $22.99, and 14 million shares were traded after the markets closed. The stock earlier rose 22 cents to $21.80 in Nasdaq Stock Market composite trading. They have risen 66 percent so far this year.

Chambers told investors in September that August orders were "a little bit better" than he'd expected. The company later said the order backlog was growing. Chambers has cut costs to help compensate for lack of sales growth. In the first quarter, operating expenses declined to $2.12 billion from $2.19 billion.Chambers, who received a $1 annual salary and declined a bonus for the second straight year, has boosted per-share profit by cutting costs and using part of Cisco's $20.7 billion in cash and investments to repurchase shares.The company, which sells 68 percent of all switches and 81 percent of routers that direct data traffic, tends to charge higher prices than competitors, including Brampton, Ontario-based Nortel Networks Corp., the number two equipment company, and number three 3Com Corp. of Marlborough, Mass.

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