Cisco earnings: "Return to strong balanced growth"

Cisco reported third quarter earnings that exceeded analyst estimates and said that its strategy for managing the downturn has been working.
Written by Sam Diaz, Inactive

Cisco Systems today reported solid third quarter financial results, noting that company witnessed a "return to strong balanced growth" across the board that has not been seen since before the economic downturn.

For the quarter, Cisco reported net income of $2.5 billion, or 42 cents per share, a 40 percent increase from the same quarter a year ago. Revenue was $10.4 billion, a year-over-year increase of 27 percent. Wall Street analysts had been expecting earnings of 38 cents per share on revenue of $10.24 billion. (Statement, Preview)

In a statement, Cisco CEO John Chambers said that the company is coming out of the downturn stronger, gaining market share and a "larger share of the total wallet spend of our customers" with next-generation products in across almost every category. He said:

Our innovation and operational engines are exceeding our expectations. This applies to products, organization structures, business models, and movements into 30+ new market adjacencies. From almost every measurement perspective - revenues, earnings per share, new products, successful acquisitions, internal startups - our results in Q3 were the proof points that our strategy is working and was probably the strongest quarter in our history.

In terms of financial guidance for the fourth quarter, the company said it expects revenue growth of 25-28 percent year-over-year. The company's fiscal fourth quarter is especially noteworthy. Chambers said that, as far as Cisco is concerned, Q3 of fiscal 2009 was the bottom and that Q4 of fiscal 2009 was more in-line and will provide a more typical comparison against 2010.

On a sequential basis, the growth figure is a calculated one that involves an extra week in Q3 and the impact of the tandberg acquisition. Assuming normal circumstances, growth would be 5-6 percent, sequentially. Take away the extra week in Q3, which is estimated to have had a 3-4 percent impact, and then add back the 2 percent growth expected from Tandberg and you get the 3-5 percent sequential growth expected in Q4.

Chambers further noted that the third quarter represented a return to balance across the board by geography and customer segments. He specifically addressed Europe, where economic turmoil has been a subject of concern, by saying that the company was "very pleased" with results from the region, noting that growth was up about 30 percent year-over-year.

Asked for more detail about Europe, Chambers remained optimistic, noting that, as a region, the company is comfortably forecasting double-digit growth and said that Europe accounts for about 22 percent of the revenue. There are no signs that the economic conditions in Europe are spreading globally, he said, and that tech spending trends around the globe are headed in the right direction.

Overall, Chambers said the company is in its "best position ever" to achieve its long-terms goals and aspirations. However, he did offer a warning call about the volatility of the global economy and said he wouldn't be surprised to see economic ups and downs over the next 12 months.

Shares of Cisco were up 3 percent, closing at $26.74 in regular trading. Shares were on the rise in after-hours trading.

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