SAN FRANCISCO (dpa-AFX) - Cisco Systems, Inc. (CSCO) said Wednesday after the markets closed that its first quarter profit fell 8% from last year, as higher costs and expenses offset a 4.7% increase in revenue. However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly revenue.
The world's largest computer networking gear maker reported GAAP net income for the first quarter of $1.8 billion or $0.33 per share, compared to $1.9 billion or $0.34 per share for the year-ago quarter and $1.2 billion or $0.22 per share for the previous sequential quarter.
Excluding items, non-GAAP net income for the first quarter was $2.3 billion or $0.43 per share, compared to $2.4 billion or $0.42 per share in the prior year quarter and $2.2 billion or $0.40 per share in the prior quarter.
On average, 38 analysts polled by Thomson Reuters expected the company to earn $0.39 per share for the first quarter. Analysts' estimates typically exclude special items.
Gross margin for the fourth quarter was 61.2%, down from 62.9% in the year-ago quarter and 61.3% in the previous quarter.
San Jose, California-based Cisco, which makes the routers and switches that direct computer and telecommunications traffic over corporate networks and the Internet, said net sales for the first quarter rose 4.7% to $11.26 billion from $10.75 billion in the same quarter last year. First quarter net sales grew 0.5% sequentially. Thirty-four analysts had a consensus revenue estimate of $11.02 billion for the first quarter.
Product sales for the first quarter increased 2.9% to $8.95 billion from $8.70 billion a year ago, while services revenue for the quarter grew 12.2% to $2.30 billion from $2.05 billion last year.
'We delivered a solid quarter,' said John Chambers, Cisco Chairman and CEO. 'We've completed the majority of our restructuring and have organized Cisco to successfully execute against our strategy of providing intelligent networks, architectures and integrated products that solve customers' business problems.'
Cash flows from operations for the first quarter were $2.3 billion, compared to $1.7 billion for the prior year quarter and $2.8 billion for the prior quarter.
During the first quarter, Cisco repurchased 100 million shares of its common stock for $1.5 billion. In November 2010, Cisco's board of directors authorized up to $10 billion in additional repurchases of its common stock under the stock repurchase program, increasing the authorized amount of aggregate stock repurchases to $82 billion. The remaining authorized amount for stock repurchases under the program as of October 29, 2011 was about $8.7 billion with no termination date.
Cisco's balance sheet looked rock solid. The company ended the first quarter with cash and cash equivalents and investment of $44.4 billion, compared to $44.6 billion at the end of fiscal 2011.
After aggressively pursuing the acquisition-led growth strategy during the last couple of years, diversifying its business and entering consumer markets, Cisco has recently tried to become a leaner and more focused organization. In April, Cisco announced a restructuring of its consumer business, including closing down the Flip video camera business. In May, the company announced changes to its business structure and organization, aiming to enhance customer focus and to simplify its operations.
In July, Cisco announced an agreement to sell its set-top box manufacturing facility in Juarez, Mexico, to Foxconn Technology Group.
However, the company has been struggling with rising costs that has threatened to derail its earnings growth. The company has reported lower profits for four consecutive quarters, including latest one. To reduce costs, Cisco has cut thousands of jobs.
In September, Cisco trimmed its long-term annual revenue growth forecast by more than half. The company now expect sales to grow 5% to 7% annually by 2014, down from its earlier forecast of 12% to 17% growth. Earnings are expected to grow about 7% to 9% in the coming three years, with operating margins in the mid-20s percentage range. Gross profit margin for 2012 is targeted in the range of 60% to 62%.
Cisco has indicated that it would continue to pursue smaller acquisitions. During the last quarter, Cisco announced the acquisition of privately held Versly and its plan to acquire privately held BNI Video.
Cisco is viewed as a technology-industry bellwether because it dominates the market for routers and switches. Since the company's latest results are for the full month of October, instead of September for many of the technology giants, they are also seen as an early indicator of industry trends.
Juniper Networks, Inc. (JNPR), which competes with Cisco in the router industry, last month reported lower third quarter profit, as one-time charges and lower gross margin offset growth in sales of its computer networking gear. However, the company's quarterly earnings, excluding items, were in line with Street estimates, while sales topped expectations.
Cisco shares, which have traded in a range of $13.30 to $24.60 over the past year, closed Wednesday's regular trading session at $17.61, down 70 cents or 3.82%. The stock is currently gaining 59 cents or 3.35% in after hours trading.
Copyright RTT News/dpa-AFX
© 2011 AFX News
