Cisco Systems posted stronger-than-expected quarterly results and said it expected the weak economic environment to be relatively short term, sending its shares up 7 per cent after the market closed last night.
Investors took heart from chief executive John Chambers' comment that he had "very strong" confidence in Cisco's long- term revenue growth target of 12 per cent to 17 per cent, even though the company's quarterly forecasts were a little light compared with average analyst estimates.
"Despite concerns of deterioration in its core market, Cisco reiterated its long term growth guidance, giving jittery investors some comfort," said Mark Sue, an analyst at RBC Capital Markets. "A lot of people were worried that the number would have to come down."
Cisco, which sells routers and switches that direct Web traffic, has benefited as global phone companies and large corporations upgrade their networks to meet growing Internet use, but investors have been worried that a weaker economy could weigh on technology spending.
Its profit for the fiscal fourth quarter ended July 26th rose to $2.0 billion, or 33 cents a share, from $1.9 billion, or 31 cents a share, in the year-ago quarter. Earnings excluding items was 40 cents per share, exceeding the average analyst forecast by a penny, according to Reuters Estimates.
Quarterly revenue rose 9.9 per cent to $10.4 billion, surpassing $10 billion for the first time. Analysts on average had expected revenue of $10.3 billion.
Analysts said they were particularly happy with Cisco's announcement that its book to bill ratio was "comfortably over" 1, indicating a healthy balance of demand to supply.
While the veteran technology executive avoided giving a full-year outlook for the fiscal year that just began, only giving an outlook for the first two quarters which were slightly below estimates, analysts said they were happy with what they got.
Cisco forecast revenue growth of 8 per cent in the first quarter and 8.5 per cent in the second quarter. Wall Street on average was looking for first quarter revenue growth of 8.8 per cent and second quarter of 9.5 per cent.