Computer and telephony infrastructure provider Cisco Systems Inc. posted fiscal first-quarter profits just above analyst expectations, but the company also revealed its inventory levels increased 59 percent during the quarter, causing investors to warily wonder if Cisco is preparing for a spending slowdown by communication carriers.
Immediately following the news last Monday, Cisco’s stock fell $1.88 to $53.25. It made a healthy recovery the next day, climbing to $56.75, but had since fallen slightly further to $53.13 at RCR Wireless News press time.
The news had a chain effect, sending the stock of the company’s chip suppliers on a downward spiral. PMC-Sierra Inc. tumbled 16.9 percent to $127.94, and Cisco’s top supplier, GlobeSpan Inc., fell 25 percent to $50.25.
Cisco said the inventory buildup was a response to an earlier shortage of components, and it wanted to stock up to avoid further shortages.
The company reported sales for the first fiscal quarter ended Oct. 28 of $6.52 billion, nearly double the $3.92 billion in sales reported for the same time the previous year. Its pro forma net income of $1.36 billion, or 18 cents per share, beat analyst expectations of 17 cents per share, according to First Call/Thompson. The company reported net income of $814 million, or 11 cents per share, for first fiscal quarter 1999.
During the quarter the company also acquired several companies, including Vovida, IPCell and PixStream to expand its portfolio of broadband products and services.
“We are very pleased with the solid balance across our major geographies, lines of business and product families. And, while we’re proud of our accomplishments over the last decade, we are even more optimistic about the opportunities for Cisco in the next decade,” said John Chambers, president and chief executive officer of Cisco.
