updated 8/9/2006 9:35:06 AM ET 2006-08-09T13:35:06

Shares of Cisco Systems Inc. surged Wednesday, one day after the network-equipment maker reported a gain in fiscal fourth-quarter profit and issued a bullish outlook.

Executives predicted revenue in the new fiscal year would grow 15 percent to $9.18 billion.

“We believe our vision, strategy and execution are in great shape as we enter 2007,” Cisco CEO John Chambers said.

Net income for the three months ended July 29 was $1.544 billion, or 25 cents per share, compared with 1.540 billion, or 24 cents per share, in the fiscal fourth quarter of 2005.

The latest results would have shown an increase of nearly 22 percent in net income, except for $152 million in compensation expenses related to employee stock options and employee stock purchases. Had those accounting changes been in place last year, Cisco would have reported fiscal fourth quarter profit of $1.27 million, or 20 cents per share, in 2005.

Quarterly sales at Cisco, one of the world’s largest makers of routers, switches and other devices that connect computers to the Internet, rose to $7.98 billion from $6.6 billion in the same quarter of 2005. The San Jose, Calif.-based company also produces digital subscriber line and cable broadband equipment, Internet telephone products and network management software.

“The growth and profitability are impressive, particularly since the overall market hasn’t been stellar,” said Barry Jaruzelski, vice president of the communications and technology practice at Booz Allen Hamilton. “It’s not shabby in an absolute sense, either. It’s a pretty positive story.”

Cisco also has managed to stay above the stock-options backdating scandal that has gripped at least 80 companies nationwide, including rival Juniper Networks Inc. The companies are investigating whether they retroactively pinned the option’s exercise price to a low point in the stock’s value — a practice that makes the rewards more lucrative. If companies backdate options without accounting for the move, it can cause profits to be overstated and taxes to be underpaid. It also exposes companies to possible fraud charges.

“Given the recent attention to this issue, Cisco thoroughly reviewed its issuance of stock option grants and can state with confidence that we did not change stock option grant dates to give a lower exercise price,” said Chief Financial Officer Dennis Powell.

Excluding options and other expenses, Cisco earned $1.9 billion, or 30 cents per share, compared with $1.6 billion, or 25 cents per share in the fiscal fourth quarter of 2005. On that basis, which doesn’t conform to generally accepted accounting principles, Cisco easily surpassed the mean estimate of 28 cents per share, or $1.76 billion on sales of $7.92 billion, according to a survey of analysts by Thomson Financial.

Cisco earned $5.6 billion, or 89 cents per share, in the 2006 fiscal year on sales of $28.5 billion. Excluding special expenses, Cisco earned $6.9 billion, or $1.10 per share for the year. Wall Street was expecting the company to earn $6.74 billion, or $1.08 per share, on annual sales of $28.42 billion.

The company also said it is taking on a challenge that may be more formidable than pleasing Wall Street: It plans a consumer advertising push aimed at getting average Internet users — not software programmers and hardware administrators — to recognize and even embrace the brand.

“The goal is to have a strong brand image with the consumer that makes them think about how we change their life experience,” said Chambers, who emphasized that the campaign would not be a “technical, geeky thing” but an idea that resonates with the average consumer. “Cisco is the gateway to your future.”

Making Cisco accessible to non-technophiles is a tall order. The company is one of the world’s largest makers of routers, switches and other devices that connect computers to the Internet. In 2003, it acquired Linksys, which is now the company’s home networking division. In February, Cisco completed the $6.9 billion acquisition of Scientific-Atlanta Inc., the No. 2 seller of cable television boxes after Motorola Inc.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments

Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.93%
$30K home equity loan FICO 5.20%
$75K home equity loan FICO 4.58%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 13.42%
13.40%
Cash Back Cards 17.92%
17.91%
Rewards Cards 17.13%
17.11%
Source: Bankrate.com