Cisco Beats Estimates by a Penny

Cisco (CSCO Quote) after the close of regular trading Tuesday reported first-quarter earnings for fiscal year 2000 that beat Wall Street analysts' expectations by a penny due to growth in sales to Internet service providers.

But the company also said first-quarter earnings fell by 14% to $438 million, or 13 cents a diluted share, from $512 million, or 15 cents a share, in the previous year's quarter. Cisco attributed the earnings decrease to its mass of acquisitions. Perhaps not coincidentally, Cisco announced earlier in the day that it would pay nearly $800 million for Aironet Wireless Communications (AIRO Quote).

Shares of Cisco rose 2 in after-hours trading to 76 1/4. The increase helped the company recover from a 1 1/16 decline in the regular trading period.

In its earnings report for the first quarter that ended Oct. 30, the networking titan reported net income rose by 49% to $837 million, or 24 cents a diluted share, from $561 million, or 17 cents a diluted share, in the year-earlier quarter. A consensus of analysts polled by First Call/Thomson Financial called for Cisco to earn 23 cents a share.

Revenues rose 46% to $3.8 billion from $2.6 billion in the comparable 1998 quarter.

"Our goal continues to be to grow as fast or faster than the overall market," said John Chambers, Cisco's president and chief executive, during a conference call with analysts.

Chambers said he foresees three concerns on the horizon: worldwide economic conditions, increasing competition, and Y2K challenges. He said the company is cautiously optimistic about the world's economy and Y2K. But further consolidation of the industry will cause more competition and offer fewer opportunities to acquire other companies, which has been a longtime goal for Cisco.

Cisco continued that quest to expand its Internet business opportunities with the announcement made earlier in the day that it was acquiring Aironet for $799 million.

The acquisition of the Akron, Ohio-based company will give Cisco's customers wireless access to their local area networks.

Aironet shares will be converted into 0.637 Cisco common share. Based on Cisco's closing price of 75 5/16 on Monday, the transaction has a value of about $799 million. Cisco expects to take a third-quarter charge of 3 to 8 cents a share for purchased in-process research and development expenses.

The acquisition, the 14th made by Cisco this year, has been approved by the board of directors of each company but still faces regulatory review.

Charlie Giancarlo, a senior vice president for Cisco, said the acquisition, which is his company's third largest this year, is the first in Cisco's small-medium line of business in three years. He called it "a very important" deal that was completed in two weeks once Cisco decided it wanted to acquire Aironet.

Aironet's stock closed regular trading Tuesday up 2 1/16 to 45 3/8.