Slashdot It! Cisco Systems, the network equipment maker, reported a 34 percent gain in quarterly profit on Tuesday that it attributed to strong demand for high-speed networking, particularly in international markets.
But the report from the company, considered a technology bellwether, dashed the lofty hopes of investors looking for even better sales growth after Cisco’s strong improvement in the previous quarter.
The report, released after the markets closed, caused shares of Cisco to decline more than 5 percent in after-hours trading.
The company sells routers, switches and other network equipment to telecommunications businesses and large corporations. Cisco reported profit of $1.87 billion, or 30 cents a share, for the third quarter, which ended April 28. That was up from $1.4 billion, or 22 cents a share.
Excluding one-time charges, Cisco earned 34 cents a share, a penny higher than analysts had forecast.
He said Cisco was benefiting from continued demand for network bandwidth to handle video transmissions.
Quarterly revenue increased 21 percent, to $8.87 billion from $7.32 billion a year ago, beating the $8.76 billion in revenue expected by analysts surveyed by Thomson Financial.
But that is less than the 27 percent revenue growth Cisco reported in the second quarter, when the company had revenue of $8.44 billion, up from $6.63 billion the year before.
Cisco offered a forecast of only 15 to 16 percent revenue growth for the fourth quarter.
Among the slower areas for Cisco was the enterprise business in the United States, where growth has fallen to the mid-single digits, down from 20 percent in the first quarter.
Mark Sue, an analyst with RBC Capital Markets, said that despite the few pockets of weakness, the quarter was a strong one, with good growth in most segments.
“They’re a balanced company,” he said. “Over all they are executing very well. There will be times when some sectors outperform others.”
Cisco executives said developing countries were creating a growing opportunity, accounting for more than a third of Cisco’s sales during the quarter. “It is very possible we can maintain 35 percent to 45 percent growth in the emerging markets,” Mr. Chambers told analysts.
Cisco, based in San Jose, Calif., reported gross margins of about 64.5 percent during the third quarter, and executives expect that to remain flat in the fourth quarter.
Cisco executives said gross margins had been reduced by the acquisition of Scientific Atlanta, a maker of cable equipment, which competes in a market with typically lower margins.