Cisco's Profit Rises 63%

By JOHN KELL And ROGER CHENG

Cisco Systems Inc.'s fiscal third-quarter profit surged on a 27% jump in revenue, although margins fell slightly.

"We witnessed a return to strong balanced growth across geographies, products and customer segments that we hadn't seen since before the global economic challenges began," said Chairman and Chief Executive John Chambers.

As a result, the company is sticking with its commitment to hire 2,000 to 3,000 workers over the next few quarters. Cisco hired 1,000 workers in the third quarter.

With its dominant position in the market for information-technology networking gear, and its expansion into other areas of the data-center space, Cisco is seen as a bellwether for corporate spending on technology. The company has benefited from a push toward consolidation and automated data centers, as well as improved fundamentals in the U.S., although the financial crisis in Europe is seen as a concern.

Ahead of the results, Wedbush Equity Research said demand in the quarter was strong, driven primarily by the enterprise and service-provider markets and as firms are beginning to reinvest in their data-center and server-virtualization initiatives.

For the quarter ended May 1, the world's biggest maker of Internet-connectivity equipment posted a profit of $2.19 billion, or 37 cents a share, up from $1.35 billion, or 23 cents a share, a year earlier. Excluding stock-compensation costs and other items, earnings rose to 42 cents from 30 cents.

Revenue climbed 27% to $10.37 billion. In February, the company estimated sales would rise 23% to 26%.

Sales grew 31% for the company's products segment, which makes up a bulk of Cisco's revenue, while service sales improved 11%.

Gross margin narrowed to 63.9% from 64.1%. In a conference call with analysts, Chief Financial Officer Frank Calderoni blamed the decline on both less-profitable products and additional costs.

The company expects revenue for the current quarter to by 25% to 28% from a year ago, Mr. Chambers said. Cisco's forecast includes results from its recent acquisition of video conferencing provider Tandberg ASA.

Write to John Kell at john.kell@dowjones.com

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