Cisco's first quarter was a mixed bag as revenue growth fell short of expectations, but profits were better than expected.
The company reported first quarter earnings of $2 billion, or 37 cents a share, on revenue of $12.08 billion, up 1.8 percent from a year ago. Non-GAAP earnings were 53 cents a share.
The problems: Wall Street was expecting earnings of 51 cents a share on revenue of $12.34 billion.
In a statement, Cisco CEO John Chambers said the company was executing well and that the company's "innovation engine" was humming, but he acknowledged that "revenue growth was below our expectation."
Cisco's net income included charges of $237 million related to layoffs outlined last quarter. As for the outlook, Cisco projected second quarter non-GAAP earnings to be between 45 cents a share to 47 cents a share. Wall Street was looking for second quarter earnings of 52 cents a share. For fiscal 2014, Cisco is projecting non-GAAP earnings of $1.95 a share to $2.05. Cisco also told analysts to model revenue conservatively.
On a conference call with analysts, Chambers said that the U.S. government shutdown didn't help the quarter. He also said that business leaders aren't confident about their buying decisions. Chambers elaborated:
Over the last few years I've shared what I've been seeing: a macro environment that is inconsistent and hard to read with business leaders' confidence slowing purchase decisions. The last month of our quarter of during the U.S. government shutdown. The shutdown, negotiations and key decisions exasperated the lack of confidence among business leaders we had highlighted over the past few quarters.
However, Chambers said Cisco is well positioned. He said:
I believe we are well positioned at the center of the long-term transitions shaping the communications and IT markets. We feel the momentum of our thought leadership in this market, and we are experiencing our customers' confidence in Cisco expand as we move to become their trusted business partner and hopefully the No. 1 IT partner. I know many of you speak with our customers and partners, and I'd be very surprised if you're not seeing and hearing the same thing.
The company said that it will buy back another $15 billion in shares.
Among the key figures:
- Cisco ended the quarter with cash and equivalents of $48.2 billion.
- Cash flow in the first quarter was $2.6 billion, up from $2.5 billion a year ago.
- Product revenue was $9.4 billion in the first quarter with service revenue of $2.69 billion.
- Inventory turns were 12.7, up from 11 in the first quarter a year ago.
- Days sales outstanding came in at 39, up from 30 a year ago.