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August 16, 2012

Cisco News - Cisco Reports Numbers That Generally Please Investors, Analysts

By Ed Silverstein, TMCnet Contributor

Cisco Systems saw its shares increase 7.9 percent during Thursday morning trading to $18.72, following a flurry of mostly positive announcements.

On Wednesday, Cisco reported quarterly sales and profit numbers that exceeded projections from analysts. The biggest maker of computer networking equipment also announced how it is increasing its quarterly dividend by 75 percent – from 8 cents a share to 14 cents a share. That will start in the current quarter.

Cisco said its profit for the most recent quarter (which ended on July 28 and represents the fourth quarter) was 47 cents per share. The predicted average for profit was 46 cents a share, according to Bloomberg News.

Revenue increased 4.4 percent to $11.7 billion, while analysts on average predicted revenue of $11.6 billion for the quarter, Bloomberg (News - Alert) added.

“The quarter looked reasonably good, as Cisco is executing well on its plan,” Erik Suppiger, an analyst at JMP Securities, told The New York Times.

To help streamline operations, Cisco cut 7,800 jobs over the past several months. In July, Cisco also said it would cut 1,300 employees from its payroll, TMCnet reported. The company has also lowered prices to make its products more appealing.

Overall, Cisco plans to cut about 15 percent of its employees. It also wants to reduce expenses by about $1 billion.

The company hopes investors will be attracted to its plan to return at least half of the money raised through operations via buyback of shares and payment of dividends.

“Our financial strength gives us the confidence to commit and execute against this strategy, in order to provide meaningful return to our shareholders,” said chief financial officer Frank Calderoni.

It’s also battling such companies as Juniper Networks, Huawei and Hewlett-Packard (News - Alert) for market share.

However, it’s facing relatively slow sales in Europe – due to the weak economic conditions there. Cisco relies on Europe for one-fifth of its sales, Bloomberg said.

Three months ago, Cisco CEO John Chambers (News - Alert) warned about the impact of the economy in Europe. That will not likely change soon.

"That's probably going to get tougher before it gets better and that might last for a good little while," Chambers said during a conference call.

Sales are also reportedly weaker in India and for overall government purchases.

But sales orders in North and South Americas increased 4 percent during the recent quarter and sales in Asia increased 12 percent, according to news reports.

Chambers is still cautious about the next year, given conditions facing many businesses.

"Many of our customers continue to anticipate a challenging next 12 months on a global basis and therefore these CEOs will remain conservative both in their IT expenditures but also in their hiring," Chambers said.

Bloomberg points out that new business leads to some 80 percent of Cisco’s quarterly sales.

Cisco also predicted sales and profits which are “in line with estimates,” Bloomberg said. Cisco, for instance, predicted it will see between 45 cents to 47 cents a share in profits during the current quarter. Analysts have projected 46 cents a share, Bloomberg said.

Also, sales are predicted to increase between 4 and 6 percent compared to the same quarter last year. That works out to between $11.6 billion and $11.9 billion for the current quarter. Bloomberg said analysts have predicted $11.7 billion in sales for the current quarter.

Meanwhile, the dividend hike got praise from several analysts. "It's a significant increase and now they've got a real yield," BGC analyst Colin Gillis told Reuters News Service.

Last month, Cisco acquired NDS (News - Alert) Group.

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Edited by Braden Becker

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