Cisco earnings: 'Across the board' sales acceleration

Cisco beats Wall Street's estimates for second quarter earnings.
Written by Sam Diaz, Inactive on

Cisco today reported second quarter earnings that beat Wall Street expectations and reaffirmed the company's position that economic recovery is underway.

The company reported net income of $2.3 billion, or 40 cents per share, a 25 percent jump from the year-ago quarter. Sales were $9.8 billion, up 8 percent from a year ago. Analysts had been expecting 35 cents per share on sales of $9.4 billion. (Statement)

In a statement, chairman and CEO John Chambers, said:

During the quarter we saw dramatic across the board acceleration and sequential improvement in our business in almost all areas. We are confident that our aggressive strategy of investing in the business during the downturn and our focus on innovation, operational excellence, and productivity are driving our momentum and growth in the market. We believe that we are extremely well-positioned - by geography, in our customer segments, and in our key product categories - as economies around the world continue to improve and our customers increase their technology investments.

In a call with analysts today, Chambers said the industry is heading into the next phase of recovery, as "across the board" acceleration became evident during the quarter. Not only are all regions now seeing growth but the company also pointed to increased productivity over the last two quarters.

Revenue per employee grew by 9 percent from the previous quarter, which was up 8 percent from the quarter before that. Sure, some of that can be attributed to raw revenue growth, Chamber said. But he also believes a new organization structure and the company's use of its own products and technologies contributed, as well.

Chambers was careful to note that economic recovery is still volatile and that there are still many unknowns. However, the company is no longer operating under the shadows of a doom-and-gloom outlook. Instead, Cisco is approaching the future with optimism about the evolution of the economy. If things change, then the company will adjust, Chamber said. But, the company believes that growth is on track for the future and it will make decisions accordingly.

He also noted that customers are providing positive feedback about Cisco's changes to its business models during the recovery. They now understand how the market adjacencies that Cisco is entering are related and can drive growth. And the results are starting to show that Cisco is planning well for future growth.

With that said, Chamber said the company is looking to add between 2,000 to 3,000 people in the coming quarters, with headcounts targeted at strategic opportunities for productivity improvements while adding resources to drive those new markets for Cisco.

Looking ahead, the company issued Q3 guidance of total revenue to grow 23 percent to 26 percent from the year-ago quarter. Total gross margins are expected to be between 64 percent to 65 percent.

Really want to know more details about the quarter's financials? Beyond reading the press release and financial statements, check out the YouTube video of Cisco CFO Frank Calderoni talking about them on the company's blog.

Shares of Cisco were up slightly in regular trading, closing at $23.07. Share are on the rise in after-hours trading.

Previous coverage: Cisco earnings: Demand expected to bounce back; Supply worries loom

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