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Cisco Soars on Accounting Change, Client Upgrades

Cisco Systems Inc.’s (CSCO) fiscal second-quarter earnings came in higher than analysts projected, thanks to two factors – an accounting change and more customer network upgrades.

Cisco now includes R&D “upon acquisition” in its reports instead of expensing it. That shift helped Cisco record a $1.9 billion profit, up from $1.5 billion in the year-ago period. Sales jumped too, from $9.089 billion to $9.8 billion. Wall Street analysts expected an average of $9.409 billion.

The higher numbers came as more clients bulked up their networks to accommodate ever-rising wireless and Internet traffic, Cisco said. Because of that, CEO John Chambers chalked up the increases to “a clear indication that we are entering the second phase of the economic recovery,” he said in a prepared statement.

“We believe that we are extremely well-positioned – by geography, in our customer segments, and in our key product categories – as economies around the world continue to improve and our customers increase their technology investments,” Chambers said.

In addition to more sales, Cisco also stockpiled a cash reserve. In fact, it added $1 billion more to its coffers from the first fiscal quarter from $2.5 billion. The number is down, though, from 2009’s fiscal quarter, when Cisco had $3.2 billion in cash.

Cisco reported its earnings after the bell on Wednesday. Its shares closed .22 percent higher at $23.07 and were trading 2.64 percent higher at $23.68 in after-hours trading.


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