Friday, May 25, 2012

Cisco Reports Steady Earnings, Lower Outlook


Cisco ($CSCO) reported QE April 2012 financial results on May 9.

Cisco has rebounded from the financial performance lows of 2011 and is doing relatively well. Let's be clear, Cisco is not a high growth company but trudges along on recent year on year revenues growth of 6%+ and volatile YoY historical earnings per share growth of 15%+. If you get more - great - if you get less - wait until next quarter. Cisco's business environment has been described as slow-moving sales.

The QE April 2012 Non-GAAP earnings per share of $0.48 beat estimates by +$0.01 and GAAP EPS of $0.40 was the same as the prior quarter. CEO John Chambers has restructured Cisco, cut costs, increased dividends, continues stock repurchasing, and has successfully aimed at better bottom line results.

Revenues were an all-time high and operating income and net income were very good. Margins were steady and solid. Cisco has moved beyond the quarterly restructuring charges, a minor $20M, and financial performance has improved. CEO John Chambers stated, "We delivered solid results this quarter with record revenue and non-GAAP earnings per share. We are successfully executing against our long-term strategic plan of growing profit faster than revenue, and in a cautious IT spending environment, we continue to outperform our competitors."

Cisco Income Statement QE April 2012 Cisco reported record total revenues of $11.59B, net income of $2.17B, and GAAP earnings per share of $0.40. From the prior quarter QE January 2012, these were +0.53%, -0.78%, and +0.00%, respectively. From the prior year QE April 2011, these were +6.64%, +19.81%, and +21.21%, respectively. The quarterly restructuring charge was an immaterial $20M, compared to the prior quarters of $3M, $202M, $768M, and $31M. Gross, operating, and net margins were steady at 61.87% (6-quarter high), 23.73% (9-quarter high), and 18.68%. Cash flow from operations of $0.54 per share is above the historical average. The operating expense ratio of 38.13% is below the historical average.

Cisco Balance Sheet QE April 2012 Cisco's total assets increased to a record $91.15 billion. The capital to assets ratio of 56.36% is stable and a 10-quarter high. The current ratio of 67.15% is a multi-year high. The return on assets is low for a technology company, but increased to 8.36%, a 4-quarter high. Total debt dipped to 17.96% of total assets, a multi-year low, and is the result of an embedded financing operation.

Cisco Outlook QE July 2012 CEO John Chambers estimated total revenues to grow 2% to 5% YoY. This equates to $11.42B to $11.76B for QE July 2012. This is about the same as the QE April 2012 guidance and results. Non-GAAP earning per share is estimated at $0.44 to $0.46. This is lower than the QE April 2012 Non-GAAP EPS results of $0.48. This isn't really all that bad an outlook as the QE July is typically the annual cyclical low for Cisco. This would be the best QE July performance in years, if not ever.

Workforce Reduction, July 18, 2011 Cisco will layoff 6,500 employees and incur cash-based restructuring charges, consisting of severance and other one-time termination benefits, estimated at $1.3 billion over several quarters. Cisco estimates approximately $750 million of these charges will be incurred in QE July 2011, including approximately $500 million relating to the voluntary early retirement program. The remaining estimated $550 million of charges will be recognized in the subsequent 4 quarters, beginning with QE October 2011. Cisco Announces Additional Detail on Comprehensive Action Plan

Cisco Financial Performance by the Quarters













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