SAN FRANCISCO (dpa-AFX) - Cisco Systems, Inc. (CSCO) said Wednesday after the markets closed that its fourth quarter profit fell 36% from last year, hurt mainly by hefty restructuring charges related the job cuts that the company announced last month. 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 fourth quarter of $1.2 billion or $0.22 per share, compared to $1.9 billion or $0.33 per share for the year-ago quarter and $1.8 billion or $0.33 per share for the previous sequential quarter.
The latest quarter results include pretax restructuring and other charges of $772 million, consisting of $453 million in charges for a voluntary early retirement program, $214 million for employee severance, $61 million related to the planned sale of the company's Juarez, Mexico manufacturing facility, and $44 million of residual costs related to exiting, realigning and restructuring certain aspects of its consumer business announced in the previous quarter.
Last month, the company said it will eliminate nearly 6,500 jobs, or 9% of its workforce, in an attempt to cut mounting costs. The job cuts include about 2,100 employees who elected to participate in the voluntary early retirement program.
Excluding stock options expenses, restructuring charges and other items, non-GAAP net income for the fourth quarter was $2.2 billion or $0.40 per share, compared to $2.5 billion or $0.43 per share in the prior year quarter and $2.3 billion or $0.42 per share in the prior quarter.
On average, 38 analysts polled by Thomson Reuters expected the company to earn $0.38 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Gross margin for the fourth quarter was 61.3%, down from 62.7% in the year-ago quarter but the same as 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 fourth quarter rose 3.3% to $11.20 billion from $10.84 billion in the same quarter last year. Fourth quarter net sales grew 3% sequentially. Thirty-seven analysts had a consensus revenue estimate of $10.98 billion for the fourth quarter.
Product sales for the fourth quarter increased 1.2% to $8.92 billion from $8.81 billion a year ago, while services revenue for the quarter grew 11.8% to $2.27 billion from $2.03 billion last year.
'We've made significant progress on our comprehensive action plan to position ourselves for our next stage of growth and profitability, while delivering solid financial results in Q4,' said John Chambers, chairman and CEO, Cisco. 'As we start our next fiscal year, you will see a very focused, agile, lean and aggressive company, that is laser focused on helping our customers use intelligent networks to transform their businesses.'
Cash flows from operations for the fourth quarter were $2.8 billion, compared to $3.2 billion for the prior year quarter and $3.0 billion for the prior quarter.
During the fourth quarter, Cisco repurchased 95 million shares of its common stock for $1.5 billion. On November 18, 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 is about $10.2 billion with no termination date.
Cisco's balance sheet looked rock solid. The company ended the fourth quarter with cash and cash equivalents and investment of $44.6 billion, compared to $39.9 billion at the end of fiscal 2010 and $43.4 billion at the end of the third quarter 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.
Cisco last month announced an agreement to sell its set-top box manufacturing facility in Juarez, Mexico, to Foxconn Technology Group. The deal, terms of which were not disclosed, is projected to close in October.
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 July, instead of June 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 a worse-than-expected decline in second quarter profit, as lower margins and crippling one-time expenses offset growth in sales. Additionally, the company forecast a weak third quarter, with earnings expected to miss Street estimates.
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 $13.73, down 33 cents or 2.31%. The stock is currently gaining $1.24 or 9.03% in after hours trading.
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