Cisco Profit Tops Estimate; Revenue Falls Short

(RTTNews) - Cisco Systems, Inc. (CSCO), the world's largest computer networking gear maker, said Wednesday after the markets closed that its first quarter profit fell 4.6% from last year, as higher restructuring and other expenses more than offset a 1.8% increase in revenue.

However, the company's quarterly earnings per share, excluding items, came in above analysts\ expectations, but its quarterly revenue fell short of analysts' forecast.

"This quarter we delivered record non-GAAP profitability and continued our steady stream of innovation and market leadership," stated Cisco Chairman and CEO John Chambers. "While our revenue growth was below our expectation, our financials are strong, our strategy is strong and our innovation engine is executing extremely well."

The company also said that its board of directors has authorized up to $15 billion in additional share repurchases.

On a conference call with analysts, Cisco said it expects second quarter revenue to decline 8% to 10% and adjusted earnings to be $0.45 to $0.47 per share. Analysts currently expect the company to earn $0.52 per share on revenue growth of 4.10% for the second quarter.

Cisco shares are currently losing 10.98% in after hours trading after closing the day's regular trading session at $24.00, up 27 cents or 1.12%. The shares trade in a 52-week range of $17.62 to $26.49.

For the first quarter ended October 26, 2013, the San Jose, California-based company reported net income of $2.0 billion or $0.37 per share, compared to $2.1 billion or $0.39 per share for the year-ago quarter.

The latest quarter results include pre-tax charges of $237 million related to the company's workforce reduction plan announced in August, and a pre-tax charge of $257 million related to compensation expense in connection with Cisco's acquisition of the remaining interest in Insieme Networks, Inc.

This marks the first time in eight quarters that Cisco's profit has declined year over year. The company had been struggling with rising costs that threatened to derail its earnings growth. To reduce costs, Cisco cut thousands of jobs. In August, Cisco said it would cut 4,000 jobs, or 5% of its global workforce, to "rebalance" its employee base.

Excluding items, adjusted net income for the first quarter was $2.9 billion or $0.53 per share, compared to $2.6 million or $0.48 per share in the prior year quarter.

On average, 35 analysts polled by Thomson Reuters expected the company to earn $0.51 per share for the first quarter. Analysts' estimates typically exclude special items.

Cisco, which makes the routers and switches that direct computer and telecommunications traffic over corporate networks and the Internet, said total revenue for the first quarter rose 1.8% to $12.09 billion from $11.88 billion in the same quarter last year. Thirty-five analysts had a consensus revenue estimate of $12.36 billion for the first quarter.

Product revenue for the quarter increased 1.1% to $9.4 billion, while services revenue for the quarter grew 3% to $2.7 billion.

During the first quarter, Cisco repurchased about 84 million shares of common stock for an aggregate purchase price of $2.0 billion. The remaining authorized amount for stock repurchases under the company's stock repurchase program, including the latest authorization, is about $16.1 billion with no termination date.

Cisco's balance sheet looked rock solid. The company ended the first quarter with cash and cash equivalents and investment of $48.2 billion, compared to $50.6 billion at the end of the prior quarter.

Cisco is aggressively pursuing the acquisition-led growth strategy, diversifying its business and entering consumer markets. During the quarter, Cisco completed the acquisitions of cybersecurity solutions provider Sourcefire Inc. and privately-held Composite Software, Inc.

Cisco is viewed as a technology-industry bellwether because it dominates the market for routers and switches. Since the company's latest results are for the full month of October, instead of September for many of the technology giants, they are also seen as an early indicator of industry trends.

Juniper Networks, Inc. (JNPR), which competes with Cisco in the router industry, last month reported a sharp jump in third quarter profit, helped by higher revenue and improved margins. The company's quarterly earnings per share, excluding items, also came in above analysts' expectations as did its quarterly revenue. For the fourth quarter, the company gave an in line earnings forecast, but the mid-point of its revenue forecast trailed analysts' current consensus estimate.