Cisco Systems Inc. (NASDAQ: CSCO) just reported earnings, and the caution is likely to continue. The networking giant earnings were $0.43 EPS while sales gained 27% to $10.836 billion. This is a disappointment for the bulls. Estimates were $0.42 EPS and revenues of $10.88 billion per Thomson Reuters consensus estimates. If revenues are soft, then it too is seeing a bit of a slowing in at least some areas of its business.
We noted in the Cisco earnings preview to watch days sales outstanding in accounts receivable, and that figure grew to 41 days from 39 days just a quarter ago. Non-GAAP inventory turns were 12.1 in the fourth quarter, above a year ago and the prior quarter. The gross margin as a percentage of revenues also came in at 62.6% versus 64% last quarter.
CEO John Chambers did not offer guidance. He did address the sluggish economy though: “Whether the global economy continues to show mixed signals or not — the strength of our financial model and profit generation serves us well…”
Chambers also said that Cisco will continue “to aggressively move into new areas where the network is becoming the platform, and where our customers want us to invest and innovate.”
Cash and cash equivalents were $39.9 billion at the end of July versus $39.1 billion the prior quarter and versus $35.0 billion a year ago. Cash flows from operations were $3.2 billion for the fourth quarter of fiscal 2010.
Cisco said that it repurchased 99 million shares of common stock at $23.33 per share on average for a total of $2.3 billion. During 2010, Cisco bought back some 325 million shares of common stock for an average of $24.02 and it spent $7.8 billion.
Cisco does not offer guidance until its conference call and that makes this unfinished business. Shares closed down 2.4% at $23.73 in regular trading. Shares are trading down around $22.45 in the after-hours session. The 52-week trading range is $20.68 to $27.74.
As a questionable “beat” because revenues were light, this is not going to cut it. Chambers also discussed the sluggishness out there, which may make many think Chambers won’t be looking for any great growth. Chambers also needs to pay out a dividend rather than keep buying back shares.
JON C. OGG
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