Cisco Rocks Numbers, One Caveat Seen (CSCO)

Cisco Systems Inc. (NASDAQ: CSCO) had a bullish bias going into earnings as far as the options traders were concerned.  The networking giant has posted earnings of $0.40 EPS on an 8% revenue gain to $9.8 billion in revenues.   This compares to estimates from Thomson Reuters of $0.35 EPS and $9.41 billion in revenues.  The financial results are impressive, so long as one key accounting measure from more technical ‘internal watchers’ is not a red flag.

John Chambers chimed in by saying that Q2 results exceeded expectations and said the results show a clear indication of entering ‘the second phase of the economic recovery’ on acceleration and sequential improvement  in almost all areas of its operations.

Cash flows from operations were $2.5 billion for its second quarter, and its cash and cash equivalents and investments rose to $39.6 billion.  During the quarter, Cisco repurchased 63 million common shares at an average price of $23.96 per share for $1.5 billion.

There may be some concerns here on the days-sales-outstanding if this is not seasonal or if this is not due to some accounting changes on recognition.  Cisco’s days sales outstanding in accounts receivable were 39 days in the quarter, up from 32 days one quarter ago and up from 29 days in the same period a year ago. ear ago.  A second caveat here might be that based on a look at the income sheet that margins were 64.5% versus what we had as being closer to 65.0%

Non-GAAP inventory turns were 11.7 in the quarter versus 11.3-times from a sequential quarter and year over year quarter. in both the first quarter of fiscal 2010 and the second quarter of fiscal 2009.

No guidance was offered, so you can consider this report unfinished business until after John Chambers goes through his projections in the conference call.  Cisco closed up 0.22% at $23.07 on an unofficial closing price today and the after-hours reaction has shares trading up around $23.30.   The 52-week trading range is $13.61 to $25.10.

UPDATE at 5:00 PM EST: In the conference call, Cisco’s revenue guidance was 23% to 26% growth over the same quarter a year ago, which translates to roughly $10.05 billion to $10.28 billion.  Thomson Reuters has a consensus estimate of $0.36 non-GAAP EPS and $9.51 billion in revenues.  We now have after-hours trading up 3.4% from the close at $24.87 with the total day’s volume now over 75 million shares if you include the after-hours session.

JON C. OGG