Cautious Optimism at Cisco (CSCO)

Cisco Systems (NASDAQ: CSCO) is out with its third quarter earnings report.  The networking and communications equipment leader posted earnings of $0.30 in non-GAAP EPS and $8.2 billion in revenue.  The Thomson Reuters consensus estimates were $0.25 EPS and $8.07 billion in revenues.

This is down 21% from $0.38 EPS and down 17% from the $9.79 billion in revenue for the same period a year ago.

Cisco usually refrains from giving detailed long-term guidance, at least until its conference call. The estimates for next quarter are $0.27 EPS and $8.26 billion in revenue.  Cash flows from operations were $2.0 billion for the third quarter of fiscal 2009 and the cash and cash equivalents and investments were $33.6 billion at the end of the quarter.  Deferred revenue was $8.8 billion, down $100 million compared to a year ago and down some $400 million sequentially.

Cisco repurchased 77 million shares of common stock at an average price of $15.57 for some $1.2 billion.  The company has now repurchased and retired 2.8 billion shares of Cisco common stock at an average price of $20.43 per share for an aggregate purchase price of approximately $56.4 billion, and its remaining balance available for repurchase is $5.6 billion with no termination date.

If you read through the John Chambers comments, you will hear a tone that is not overly optimistic and not overly pessimistic.  Either way, the comments do not signal any huge changes in tone nor any huge surprises.  Here are his comments:

• “Cisco delivered solid financial performance despite a challenging global economy and period of evolving market dynamics… These results demonstrate our ability to drive operational excellence and manage profitability across varying economic cycles. We will use this period of market transition to align and optimize resources, make strategic investments, move into market adjacencies and enhance relationships with our customers. As we exit the quarter with a compelling financial position and an innovation engine from both a products and business model perspective, we believe we are well-positioned for the eventual economic recovery.”

Cisco was down most of the day but closed down only 0.1% at $19.61 on an unofficial closing price.  Share are trading at $20.48  in the after-hours initial reaction and the 52-week trading range is $13.61 to $19.85.

As far as which companies this report could impact tomorrow, that is a simple answer…. anything tied to technology, telecom, and enterprise spending.

JON C. OGG