Back to Headlines Print Version Buzz Up Stumble it Tweet it Facebook LinkedIn

Cisco 1Q Profit Drops 19% But Results Beat View; Shares Up

DOW JONES NEWSWIRES

Cisco Systems Inc.'s (CSCO) fiscal first-quarter profit dropped 19% as lower sales offset improved margins, and the company noted strong sequential trends and that the economic outlook has improved.

Shares rose 3.6% to $24.12 in after-hours trading as results easily topped Wall Street's expectations. At the close, the stock was up 43% this year.

Against a backdrop of greater merger activity, Cisco agreed to purchase Starent Networks Corp. (STAR) last month and is planning to acquire Tandberg ASA (TAA.OS), although the latter deal is in jeopardy as Cisco faces shareholder opposition at the Norwegian firm.

For the quarter ended Oct. 24, the world's biggest maker of Internet- connectivity equipment posted a profit of $1.79 billion, or 30 cents a share, down from $2.2 billion, or 37 cents a share, a year earlier. Excluding stock- compensation costs and other items, earnings fell to 36 cents from 42 cents.

Revenue dropped 13% to $9.02 billion.

Analysts surveyed by Thomson Reuters expected earnings of 31 cents on revenue of $8.75 billion.

Gross margin rose to 65.3% from 64.7%.

Product sales decreased 17%, while service sales rose 7.4%.

On Tuesday, Cisco unveiled a partnership with EMC Corp. (EMC) and VMware Inc. (VMW) to sell a new integrated data center product, part of a broader trend by technology companies to provide a diverse range of products. In September, Chambers said he preferred Cisco form tight partnerships, saying the company would be more aggressive this year and next than ever before.

-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

  (END) Dow Jones Newswires
  11-04-091631ET
  Copyright (c) 2009 Dow Jones & Company, Inc.