Cisco Reports Solid Q3

Optimism may be catching up with Cisco, as the company's stock is trading down after hours despite a strong earnings report today.

For its third quarter, ended April 28, Cisco reported net income of $1.9 billion, or 30 cents per share, on revenues of $8.9 billion, compared with net income of $1.9 billion, or 31 cents per share, on revenues of $8.4 billion the previous quarter. (See Cisco Reports Q3.)

For its third quarter a year ago, Cisco reported net income of $1.4 billion, or 22 cents per share, on revenues of $7.3 billion.

Cisco's non-GAAP earnings of 34 cents per share beat analysts' estimates by a penny, according to First Call .

Cisco said it expects fourth-quarter revenues to be 15 to 16 percent higher compared with a year ago -- aggressive, considering Cisco is still forecasting long-term growth of 10 to 15 percent.

But the forecast, which would put fourth-quarter sales between $9.2 billion and $9.3 billion, was only on a par with analysts' average prediction of $9.23 billion. Investors may have wanted more; Cisco shares, which had climbed 8 percent in the past two months, were down $1.48 (5.2 percent) at $26.88 in early after-hours trading.

The coming wave of Web 2.0 technologies is going to fuel the next wave of Internet usage among businesses, CEO John Chambers predicted on today's earnings call with analysts. Cisco's newly formed Media Solutions Group is dabbling in this area, although its only overt moves so far have been the acquisitions of Five Across and Tribe.net. (See Cisco Adds to Social Stockpile.)

Along similar lines, Cisco's more adventurous bets are showing signs of paying off, as its videoconferencing (TelePresence), security, and digital signage units doubled their revenues between the second and third quarters.

"This indicates a very positive momentum that even the fastest growing startups would love to have," Chambers said, while conceding these businesses are starting from small bases.

In a week when The Cable Show is going on, Scientific Atlanta enjoyed what Cisco officals said was its highest quarter of sales ever. Scientific Atlanta now represents nearly 10 percent of Cisco's product revenues, Chambers said.

— Craig Matsumoto, West Coast Editor, Light Reading

Pete Baldwin 12/5/2012 | 3:09:01 PM
re: Cisco Reports Solid Q3 Shares are down 6% this morning, after the call. Apparently people really don't like that guidance, which was predictable -- short-term investors were probably banking on faster growth (Q3 was 20% over last year).

But Cisco still doesn't deviate from saying its long-term growth will be 10 to 15 percent. Meaning they're going to slow down at some point.
krbabu 12/5/2012 | 3:08:59 PM
re: Cisco Reports Solid Q3 Seems to me that, unless new products such as Telepresence, services of WebEx, etc., take off astronomically, we are only looking at a modest growth for Cisco and John Chambers & Co. would have to rethink their dividend stance.
Pete Baldwin 12/5/2012 | 3:08:59 PM
re: Cisco Reports Solid Q3 Well, that's the thing. Cisco knows that its router franchise can't carry the company long-term (at least not as a growth company; Cisco could certainly survive as an old, creaky has-been that still draws in revenues).

That's why they're making such big talk about web 2.0 and the "next phase" of Internet ... whether it all comes true, we'll see.
everythingip 12/5/2012 | 3:08:58 PM
re: Cisco Reports Solid Q3 you seem to forget that the smart companies evolve and address the ever changing markets, based on Cisco's acquisitions in the last few years i.e SA, Linksys, Websense, (a number of niche security companies),( a number of social networking/ app development companies) and lets not forget btw a change in the logo.. The question for any long term investor is do you think they are moving in the right direction.
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