Cisco buoyed by higher web traffic

Cisco Systems, the world’s largest maker of networking equipment, on Wednesday reported stronger than expected sales and profits, completing what chief executive John Chambers called “probably the strongest quarter we’ve had in our history”.

Sales rose 27 per cent to $10.4bn, while profits rose 63 per cent to $2.2bn. This is the second consecutive quarter of growth for Cisco after revenue fell for four straight quarters during the recession.

The rise in sales was fuelled by increased demand from businesses grappling with ever-higher volumes of internet and video traffic.

Mr Chambers said the strong results indicated that the worst of the downturn had passed and businesses were returning to healthy levels of spending. “We witnessed a return to strong balanced growth across geographies, products and customer segments that we haven’t seen since before the global economic challenges began,” he said.

Mr Chambers was bullish on Cisco’s ability to continue growing in upcoming quarters and said the company planned to enter new markets and make significant acquisitions this year. “We emerge from this downturn gaining market share [and] a larger share of the total wallet spend of our customers,” he said.

Frank Calderoni, Cisco chief financial officer, said the results were driven by the natural return in spending and also by Cisco’s positioning. “Part of it is a recovery,” he said. “But more importantly, when we’re in an economic downturn we invest for growth when the economy recovers.”

Mr Calderoni said Cisco has “a totally refreshed product line” that is helping it gain market share as business picks up.

Already the leading seller of routers and switches, which move data around the internet, Cisco is moving into other areas set to experience high growth as data and internet traffic continues to surge.

Several new products gained “rapid acceptance” among existing Cisco customers in the quarter, including its new Unified Computing System, designed to streamline businesses’ IT infrastructures.

During the quarter, Cisco completed its $3bn acquisition of Tandberg, the video conferencing company, which will bolster its videoconferencing offerings.

Telepresence, its high-end video product, continues to drive sales for Cisco, and the company announced that Bank of America would install 200 systems this year.

Cisco also launched a new partnership with VMware, deepening the company’s ties in the market for virtualisation services.

Cisco shares were down 3 per cent in after-hours trading. Shares are up more than 40 per cent in the past year.