Posted By: Eugene Taylor

Fri Nov 10, 8:08 AM ET

Cisco (NASDAQ:CSCO - News) shares soared nearly 7% on Nov. 9, after the San Jose computer networking company announced surging quarterly profit and growing sales.
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As customers upgrade their links to the Internet, Cisco's business has hummed. The company said its net income rose 27.5% to $1.6 billion, or 26 cents per share, for the period ended October 28, 2006 compared to the year ago quarter. Excluding items, net income rose 21.4% to $1.9 billion, or 31 cents per share.

"This strong momentum demonstrates that customers increasingly share our vision of the network as the platform for all forms of communication and IT," said Cisco CEO John Chambers in a press release late Nov. 8.

Cisco's net sales climbed 24.9% to $8.2 billion during the quarter, compared to the same period last year. Cisco had acquired the Lawrenceville (Ga.)-based Scientific-Atlanta, which makes technology such as video distribution networks, for $6.9 billion during the third quarter of the fiscal year ended July 29, 2006. This contributed net sales of $584 million to Cisco's results during the recent first quarter of fiscal 2007 ended in October.

After the news investors bid up Cisco nearly 7% to $26.85 per share in early Nasdaq trading Nov. 9.

"As evidenced by strong October-quarter results, we think Cisco's strategy of integrating advanced applications into its networking solutions is clearly working," Standard & Poor's equity analyst Ari Bensinger said in a research note. He expects the company to hit its 10% to 15% sales growth target for the fiscal year ended in July 2007, but is dubious that Cisco will manage to sustain that growth rate over the long-term given its large revenue base. An hour earlier in another research note, Bensinger had downgraded the stock to hold from buy. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

"Our three- to five-year investments are also clearly paying off, resulting in year-over-year revenue growth of 25 percent," Dennis Powell, Cisco chief financial officer, said in a press release.

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