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Cisco's Quarter Open To Interpretation

When a company reports its quarterly earnings, anything that falls into the middle ground between thunderously good and gravely disappointing can often be viewed in a wide variety of ways.

Case in point: Cisco. The company reported its Q1, fiscal 2005 numbers on Tuesday, Nov. 9, on a conference call for analysts and the media. Net sales for the first quarter of fiscal 2005 were $6.0 billion, compared with $5.1 billion for the first quarter of fiscal 2004, an increase of 17.1 percent, and compared with $5.9 billion for the fourth quarter of fiscal 2004, an increase of 0.8 percent. Net income for the first quarter of fiscal 2005 was $1.4 billion or $0.21 per share, compared with $1.1 billion or $0.15 per share for the first quarter of fiscal 2004, and compared with $1.4 billion or $0.20 per share for the fourth quarter of fiscal 2004.

Sounds like a pretty good quarter, right? Depends on whom you ask. Some news stories about the results used words like "buoyed"and "emerging," while others chose to describe the numbers as "middling" and "tepid."

The truth is, they're all correct. Even John Chambers himself straddled the fence. During the call, the Cisco CEO said, "While there's always room for improvement, we are pleased with our execution in our key product categories, advanced technologies, geographies and other financial measurements." He also warned of continued market uncertainty that's being exacerbated by an increase in competition from low-cost Asian networking vendors, which have had increased success selling equipment abroad and figure to be players at least in the international market for the future.

But Chambers remains confident that these companies are working on a volume play and don't offer the same functionality as Cisco products. "They've had a lot of success in their home country because, typically, China doesn't require a lot of the features that are required in the U.S. and Europe; that's why you have not seen any major inroads in U.S. markets with the Chinese vendors," he says.

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