Cisco Systems reinforced its strong position in a viciously competitive market, with third quarter sales up 52 per cent to $1.65 billion, and net income up 46 per cent to $358 million, or $52 per share. The results brought a welcome boost to the recently depressed networking sector, which has been beset by investor fears of price wars and standards debates.
President and chief executive John Chambers was guardedly optimistic, saying: ?We are pleased to report the 29th consecutive quarter of revenue and earnings growth, especially given the traditional third quarter challenges.?
He added: ?We continue to see rapid movement to end-to-end networking from one strategic vendor, not only in the enterprise, but also with service providers and with system integrators.?
Cisco is achieving a leadership position, said Chambers, "because of the reduced cost of ownership achieved through a single vendor approach and enhanced productivity that customers see as a result of using the Internet.?
He acknowledged some geographic markets were weak, particularly Japan and Germany. Sales to telcos and Internet service providers, which together account for one-third of revenues, were also weak. Chambers believes the telcos are holding off on spend, waiting to move into more deregulated markets and Internet activities.
Switches increased revenue contribution by about 30 per cent but routers continue to show a decline. Cisco can go either way, said Chambers, anticipating that the market will split between the technologies, particularly 'Big Fast Routing' and Gigabit switching. The networking sector as a whole continues to grow at 30-50 per cent despite recent investor nervousness about its leading companies.
Cisco says increasing demand for end-to-end networking is driving three main lines of business - service provider, enterprise and small-medium business. It intends to continue internal development and establish more strategic alliances, minority investments and acquisitions.
The nine months saw Cisco and GTE collaborate on end-to-end service networks and the deployment of value added services and next generation IP offerings. This relationship, Cisco's first major alliance with a telecomms provider, will see GTE creating services aiming to reduce time to market, lower cost of ownership and simplify network management.
On multimedia, Cisco, Intel and Microsoft announced the Networked Multimedia Connection, a cooperative program to promote widespread adoption of networked multimedia applications in businesses using intranets and the Internet. In the security field, Cisco announced the Enterprise Security Alliance, a new initiative to provide a multi-technology framework through a single, secure routing and switching fabric for end-to-end network security. Other members include Microsoft, HP and Oracle.
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