Cisco's quarter clears hurdles; Outlook murky but close enough

Updated: Cisco Systems on Tuesday delivered fiscal fourth quarter earnings of $2 billion, or 33 cents a share, on revenue of $10.4 billion, up 10 percent from a year ago. Excluding items, Cisco reported fourth quarter earnings of 40 cents a share, a penny ahead of estimates.

The networking giant, which reported net income of $8.1 billion on revenue of $39.5 billion for fiscal 2008, seems to have hit most of its targets (statement).

On a conference call with analysts, Cisco CEO John Chambers said "it's difficult to predict" when the company will return to its long-term revenue growth target of 12 percent to 17 percent. In fact, Chambers called the macroeconomic outlook "uncertain" and said Cisco couldn't project results for all of fiscal 2009. He projected revenue growth of 8 percent in the first quarter and 8.5 percent in the second quarter, or roughly $10.3 billion and $10.7 billion, respectively. Chambers' outlook was slightly below Wall Street projections. Cisco also projected gross margins of 65 percent.

"The current challenges will remain with us for the next two quarters," said Chambers, noting that Cisco would provide more guidance once conditions became more certain. Chambers said the downturn is expected to be a short term pothole.

Chambers said that the company's strategy is to gain share and enter new markets during the downturn. "Despite uncertain macroeconomic environment our strategy is right on target," said Chambers. Cisco's outlook wasn't great, but expectations were low going into the quarter. In other words, Cisco guidance counts as a win.

Also see: Cisco faces tricky fourth quarter report

Chambers was confident in Cisco's ability to execute and was upbeat about new markets such as telepresence. Chambers noted that its customers are in transition. For instance, total overall enterprise growth appears to be stabilizing with financial services firms doing dramatically better. As for telecom carriers, Chambers said capital spending is moderating.

By the numbers:

• The company’s cash flow for operations was $3.5 billion in the fourth quarter.
• Cash and equivalents was $26.2 billion at the end of fiscal 2008.
• Days sales outstanding were 34 days, compared to 38 days a year ago. Inventory turns were 11.8 in the fourth quarter, up from 11 in the third quarter.