Cisco Systems Inc refuses to give up its title as the fastest growing company in the history of the world and the giant, San Jose-based networking equipment manufacturer continues to take market share away from its competitors. For its fourth quarter ended July 25, Cisco’s net earnings were up 36% to $523m on revenues up 35% to $2.39bn, while for the year, earnings rose 33% to $1.88bn on revenues up 31% to $8.46bn. And as the majority of equity analysts continue to rate Cisco a strong buy, chief executive John Chambers says the market for Cisco’s products just keeps getting bigger. This year we gained more market share against our traditional competitors than in any previous year in the company’s history, Chambers said. But looking ahead, Chambers said Cisco was still in the early stages of a key new market opportunity with the convergence of voice and data networks. He estimated that Cisco still only has a 10% share in this space, providing ample room for more of its unprecedented growth. The worlds of voice and data transmission are rapidly converging via the internet, said Chambers, and Cisco continues to extend its equipment offerings into markets traditionally covered by telecommunications-equipment makers like Lucent Technologies Inc and Northern Telecom Ltd. They in turn are fighting back with acquisitions in Cisco’s territory. And while the battle for market share intensifies, Cisco’s most impressive achievement is its ability to maintain its profit margins in the face of falling prices. Gross margins for the fourth quarter remained flat for Cisco at around 66% despite what Chambers described as unusually aggressive competition from well financed, old world competitors in the voice market. Cisco’s CFO, Larry Carter, said margins had been maintained with the help of lower memory and circuit board costs. Also, Carter estimates that with 64% of all its sales orders taken via the internet ($20m per day) the resulting cost savings give the company a huge competitive advantage. Cisco analysts’ biggest fears continue to center around a possible sharp fall in margins, and Carter continues to warn that long term margins will come down. It just doesn’t seem to have happened yet. But warnings aside, Carter said his company’s prime concern will always be to strike a balance between market share and earnings per share growth. Something which historically, Cisco has done better than any other company in the world, pushing its share price ever higher. So much so that the company has announced yet another stock split. The latest is a 3 for 2 split, making it six splits in the last seven years. However, even Cisco’s shares couldn’t defy the second biggest fall in the history of the Nasdaq stock market on Tuesday, as its shares fell 3.5% to $93.38.
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