Cisco Buoys the Market

August 11th, 2011 by · Leave a Comment

The once and future 800lb gorilla of the telecommunications equipment sector, Cisco Systems (NASDAQ:CSCO, news, filings), has done something it hasn't managed to do in about a year: make investors smile.  Not a big smile, but still, a smile is a smile.  Fiscal Q4 revenues of $11.2B came in a few hundred million dollars above analyst forecasts, and non-GAAP earnings per share of $0.40 was likewise a positive surprise.

Of course, positive is a relative thing and the bar is pretty low right now.  The company is in the midst of a huge round of layoffs, as it tries to retool itself after a gluttinous couple of years in which they tried to leverage a huge cash stockpile by buying everything tech related that wasn't nailed down.  Earlier this year they finally knuckled under and did what every other company has done when it gets too big to use all its cash flow: offer a dividend.  One wonders what took so long.

But nevertheless, we all needed a boost and Cisco's fiscal Q4 is at least that much.  Guidance for the next quarter is for sales growth of 1-4%, whereas analysts were expecting a decline.  Non-GAAP earnings per share is projected to come in at $0.38-0.41 - inline with expectations.  John Chambers:  “While I wish we had never had to go through this, it clearly was time for a fundamental change at Cisco.  I feel very confident about Q1 in terms of what we can control and influence, and we have built some conservatism into it.”

Cisco is refocusing its business on five areas:  routing and switching, workplace collaboration, data centers, video, and architecture that integrates the network.  But the process is and will continue to be painful, especially to those affected.

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Categories: Financials · Telecom Equipment

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