Cisco Stands By Stock Options Accounting, Reports Record Quarterly Results

"Given the recent attention to this issue, Cisco thoroughly reviewed its issuance of stock option grants, and I can say with confidence that we did not change stock option grant dates to give employees a lower exercise price ... we stand behind all of our financial statements as we reported," said Dennis Powell, CFO of Cisco, San Jose, Calif., during a conference call with financial analysts to discuss the vendor's fourth-quarter financial results.

Cisco has had a firm policy in place for over a decade that requires stock options to be determined in advance, Powell said. "We're very comfortable with our accounting for stock options."

Powell's remarks came after an analyst asked Cisco executives for comment on the stock-options accounting scandal that has impacted dozens of public companies.

Vendors such as Apple, Brocade, McAfee and Juniper Networks are among the companies grappling with the potential impact of accounting irregularities related to stock options. The U.S. Securities and Exchange Commission has said it is investigating more than 80 companies in cases related to accounting practices around stock option backdating.

Cisco President and CEO John Chambers vocally opposed changes implemented last year that require companies to expense stock options.

For its fourth quarter, ended July 29, Cisco reported earnings of $1.54 billion, or 25 cents per share. The results were flat compared to earnings of $1.54 billion, or 24 cents per share, a year ago but included stock-based compensation expenses of $152 million, or 2 cents per share. Stock option expenses were not reflected in the year-ago quarter.

Revenue for the quarter climbed to $7.98 billion, including $582 million from Scientific-Atlanta, acquired in February. That compares to sales of $6.58 billion a year ago.

Excluding charges, Cisco earned $1.9 billion, or 30 cents per share. Financial analysts expected the company to earn 28 cents per share, excluding charges, according to Thomson Financial/First Call.

Chambers said the results made for a "record quarter" for revenue, net income and earnings per share and said the company is gaining market share against nearly all of its rivals.

"The record results for Q4 are due in part to the successful implementation of our strategy given our vision of how the communications and IT industries would evolve," Chambers said. "As intelligence moves throughout the network, the network is becoming the platform that enables most forms of communications."

Cisco expects revenue growth of 19 percent to 21 percent for the first quarter of fiscal 2007.