Cisco (CSCO) Delivers The Goods In Q1, Says Recovery Taking Hold (Update)
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(Update with comments from analysts)
Cisco Systems (NASDAQ: CSCO) reported first-quarter 2010 fiscal year earnings of 36 cents per share, 5 cents better than the analyst consensus of 31 cents per share. Revenue for the quarter was $9 billion, ahead of the market estimate of $8.74 billion.
The $9 billion in revenue for Cisco is a 13 percent decline from the same quarter last year; however it showed a 6 percent growth over the fourth quarter of 2009.
The growth in sales for the Company from the last quarter indicated that companies are putting money into networking equipment, after cutting back spending on these expenses for the past year.
Cisco also stated that the Board of Directors has approved and additional $10 billion stock buyback, bringing the plan total to $13.1 billion.
Companies have put the purchases of new routers, switches and other networking equipment, of which Cisco is the world’s leading vendor, during the weak economy. However, analysts have said that companies are starting to purchase new equipment to cope with the growth of Internet traffic.
"Building off what we saw as a clear tipping point in Q4, our Q1 results continued to reflect strong sequential growth trends that meet or exceed expectations during normal economic times," Chairman and Chief Executive Officer John Chambers noted. "We view the improving economic outlook, combined with solid execution on our growth strategy, as creating unparalleled opportunity to drive more value into the core of the network."
On its conference all, Cisco indicated that they see second quarter sales rising 1-4 percent. CEO Chambers also stated that the recovery started aggressively in Q1 and the economic stimulus package is starting to have an effect.
Shares of Cisco have received a boost in the aftermarket hours with a 3.5 percent move to $24.24.
Analyst Comments:
Analyst for Canaccord Adams, Paul Mansky, stated that Cisco is in a favorable position seeing as the company was the first to see the downturn in the economy coming, therefore it was able to get a jump start on solutions. As the economy starts to experience an upturn, the Company is showing positive growth and an improved market share.
“With the upgrade cycle taking place in servers and the planning process over the last 18 months relative to next-generation architectures, Cisco is certainly emerging as the defacto champion of those efforts,” Mansky told StreetInsider.com.
Mansky did give a $1.51 EPS for the full year 2010, although he did say that $1.60 earnings per share for next year could be a possibility, especially if strong growth occurs in the service provider space.
While some businesses are starting to spend the funds on the networking equipment that was left behind during the recession, others are still waiting for the economy to become more stable before upgrading network equipment.
“The larger enterprises showed good strength in the quarter, while growth in the medium-to-small enterprises has yet to materialize.”
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