Wednesday, August 10, 2011

Cisco Systems Inc. (NASDAQ: CSCO): Q4 Earnings Preview 2011

Cisco Systems Inc. (NASDAQ: CSCO), the world's largest computer networking gear maker, is scheduled to release its fiscal fourth-quarter earnings after the market close on Wednesday, August 10, 2011. Analysts, on average, expect the company to report earnings of 38 cents a share on revenue of $10.98 billion. In the year ago quarter, the company reported earnings of 43 cents per share on revenue of $10.84 billion.

Cisco Systems, Inc. designs, manufactures, and sells Internet Protocol (IP)-based networking and other products to the communications and IT industry worldwide. The company is often considered as a technology-industry bellwether as it dominates the market for routers and switches.

In the preceding fiscal third-quarter, the San Jose, California based company's net income was $1.8 billion, or 33 cents a share, compared to a profit of $2.2 billion, or 37 cents a share, in the year-ago quarter. On an adjusted basis, the company earned 42 cents a share in the latest quarter. Adjusted income was 42 cents a share. Revenue rose to $10.9 billion from $10.4 billion. Analysts, on average, expected the company to report earnings of 37 cents a share on revenue of $10.86 billion.

At its last earnings call in May, the company said that it expects revenue to be flat to up 2% from the year-earlier period, which translates to a range of roughly $10.8 billion to $11 billion. The company said it also expects adjusted earnings in the range of 37 cents a share to 39 cents a share.

Last month, the company slashed nearly 6,500 jobs globally in an attempt to cut mounting costs. Separately, the networking-equipment giant has agreed to sell its Juarez, Mexico-based video equipment unit to Foxconn Technology Group, the terms of which were not disclosed. Cisco expects to recognize total pre-tax restructuring charges to its GAAP financial results of not more than $1.3 billion over several quarters, consisting of severance and other one-time termination benefits. The company estimates that about $750 million of these charges will be recognized during the fourth quarter of fiscal year 2011, including nearly $500 million relating to the voluntary early retirement program. The remaining is expected to be recognized during fiscal year 2012. The company also expects to incur other charges related to its reorganization program.

Cisco's global operations and a clientele spanning businesses and government agencies has made it one of the technology sector's bellwethers. The management team's record of controlling costs and growing the business through acquisitions also made them a darling of tech investors over the years. Cisco has also diversified in recent years.

Cisco has been struggling to cope with rising costs that has threatened to derail its growth. Moreover, a fragile global economy has proven more damaging than initially expected. Moreover, competition in the company’s core markets has been intensifying for some time. On the bright side, Cisco has been diverting resources to rapidly enter a wide range of adjacent businesses in relatively short order. According to industry experts, Cisco still faces competitive hurdles, as other big tech giants, including one-time partner Hewlett-Packard (NYSE: HPQ), scramble for a larger piece of the corporate IT market, especially with the shift toward cloud computing, which is boosting the demand for data center systems. Cloud computing allows companies to tap computing power through a network instead of in-house data centers.

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