Cisco's solid 1Q results show it's on the comeback trail

Cisco (Nasdaq: CSCO) continued on its comeback trail in its first quarter, turning in its second consecutive quarter of solid financials and beating Wall Street's expectations again.

The networking giant, which had been in a veritable tailspin of late as it lost marketshare to competitors and, according to many, lost its focus, Wednesday reported non-GAAP EPS of 43 cents for the quarter, beating analyst expectations of 39 cents. Earnings for the quarter were, as expected, down 7 percent from a year ago, but showed enough promise to boost share prices about 4 percent in after-hours trading. Cisco's revenue of $11.26 billion for the quarter also beat estimates of $11.02 billion.

The company said that, despite an economy that remains uncertain, government and enterprise demand for its gear remained robust, leading it to forecast that it would see a 7 or 8 percent rise in revenue in the second quarter, roughly $11.13 billion, with EPS of 42 to 44 cents, above analyst predictions.

"We delivered a solid quarter," said John Chambers, Cisco's chairman and CEO, in a statement. "We've completed the majority of our restructuring and have organized Cisco to successfully execute against our strategy of providing intelligent networks, architectures and integrated products that solve customers' business problems. Even in times of limited capital spending, intelligent networks are being deployed to drive new business, revenue and consumption models, enable new customer and employee experiences, and drive efficiencies."

During the company's earnings call, Chambers, nonetheless, reiterated the cautious advice about the world's economy that he gave at the end of the fourth quarter: "We see the uncertainties in the global markets over the last several quarters, and even today, it is too early to determine the effect on capital spending in calendar year 2012. Therefore, we would expect you to be conservative on our expectations for Q3 and Q4, and even expectations in Q2."

Chambers, though, said Cisco was beginning to see solid evidence that its restructuring efforts last year--it killed underperforming business segments, cut its workforce and, overall, dropped expenses some $1 billion--are beginning to pay off.

"We are beginning to see how the restructuring and organizational changes benefited not only our shareholders, but also our customers," he said. "We are, in our opinion, in the sweet spot of what our customers are focused on, whether it is in cost reductions, productivity, business transformation or revenue growth."

Cisco also continued to sit on a pile of cash... it said it had some $44.4 billion on hand.

Analysts, by and large, said Cisco's progress has been "solid," and said they expected the company to continue to improve.

"The company has been in recovery mode and reorganization mode and they executed well through that transition," IDC analyst Crawford Del Prete said.

BGC analyst Colin Gillis said the company's results involved "no fireworks," adding, "The company drove its turnaround very quickly."

For more:
- see this Reuters article
- see this earnings call transcript
- see this earnings release
- see this MarketWatch article

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