Earnings Preview: Cisco to report 4Q earnings

AP News
Posted: Aug 10, 2012 5:45 PM
Earnings Preview: Cisco to report 4Q earnings

NEW YORK (AP) — Cisco Systems Inc. is set to report results for its latest quarter following the market close Wednesday after warning heading into the quarter that global economic turmoil would weigh on its results.

WHAT TO WATCH FOR: Cisco, the world's largest maker of computer networking equipment, has had a lot of ups and downs in the last two years. Early last year, it was climbing quickly out of the recession, then hit a slow patch that was blamed on the company, not the economy.

CEO John Chambers started slashing jobs and narrowing the Cisco's focus, a strategy that started bearing fruit late last year. Signs of recovery started appearing in the quarter that ended in October, and the quarter that ended in January confirmed them.

Then, when reporting for quarter that ended in April, Chambers said the global economic turmoil was hitting it again, and it issued a forecast for the July-ending quarter that was below Wall Street expectations. The stock plunged and has stayed low.

As a maker of big-ticket capital equipment with an international reach, Cisco has a good window into economic trends, and analysts will be listening keenly to CEO's commentary on the conference call on Wednesday afternoon.

The company closed on the acquisition of digital video technology company NDS Group Inc. at the end of the quarter. Not all analysts have updated their forecasts to include results from NDS, which could cause some confusion. The $4 billion deal is Cisco's first major acquisition since it bought Norwegian teleconferencing company Tandberg in April 2010.

WHY IT MATTERS: Cisco is one of the largest technology companies. Its wide reach and sensitivity to business and government investment cycles make it something of an economic bellwether. It's a component of the Dow Jones industrial average.

WHAT'S EXPECTED: Analysts polled by FactSet expect Cisco to report earnings of 46 cents per share, excluding items and the cost of stock-based compensation. That's at the high end of the company's own guidance of 44 cents to 46 cents.

Analysts expect revenue of $11.63 billion, slightly above the midpoint of the company's own estimate of $11.42 billion to $11.75 billion.

Cisco usually provides an outlook for the new quarter. Analysts are expecting earnings of 46 cents per share on $11.65 billion in revenue.

LAST YEAR'S QUARTER: Cisco reported net income of $1.2 billion, or 22 cents per share, on revenue of $11.2 billion. Adjusting for severance charges and the cost of stock-based compensation, it earned 40 cents per share.