Cisco Reports Quarterly Loss

S A N   J O S E, Calif., May 8 -- In the latest sign of how the new economy has faltered, Cisco Systems Inc. today posted its first-ever net loss in the third quarter, though the results stillbeat Wall Street's expectations.

For the three months ended April 28, the world's top supplier ofnetwork equipment lost $2.69 billion, or 37 cents per share,compared with earnings of 641 million, or 8 cents per share, in theyear-ago period.

Excluding one-time gains and losses, Cisco earned 3 cents pershare.

Analysts surveyed by Thomson Financial/First Call wereexpectation 2 cents per share.

A Victim of Earlier Success

Quarter-to-quarter sales also dropped for the first time inCisco's 11-year history as a public company. Sales declined 29percent, to $4.73 billion from $6.7 billion Cisco recorded in itsfiscal second quarter. It was off 4 percent from the $4.93 billionposted in the third quarter last year.

"This may be the fastest deceleration any company of our sizehas ever experienced," said John Chambers, chief executive.Just 14 months ago, Cisco was the world's most valuable companyand the poster child of the New Economy. But a subsequent economicslowdown has caused big companies, especially in thetelecommunications industry, to cut spending.

As a result, the technology bellwether is laying off 8,500workers and taking billions in inventory writedowns. Meanwhile, itsmarket valuation has fallen from $560 billion to about $110billion.

Still, Cisco may be a victim of its own success and years ofrecord-setting growth and market domination, said Steve Kamman, ananalyst at CIBC World Markets Corp.

"It's not the company's fault at all," he said. "You can onlygrow as fast as your market — and by virtue of having succeeded sowell [Cisco] is very much the size of the market."

Today's earnings report came out after the close of regulartrading on the Nasdaq Stock Market, where shares of Cisco rose$1.12, or nearly 6 percent, to $20.37.