Earnings Preview: Cisco expects recovery to continue after recession

Monday, May 10, 2010

Earnings Preview: Cisco expects continued recovery

NEW YORK — Cisco Systems Inc., the world’s largest maker of computer networking equipment, reports its fiscal third-quarter results after the stock market closes Wednesday.

WHAT TO WATCH FOR: Last quarter, Cisco posted its first year-over-year sales increase since January 2009, as the improving economy gave businesses confidence to invest in information technology upgrades.

Analysts expect Cisco to post an increase for this quarter as well, though investors will listen for comments on the effect of the European debt crisis, particularly since Cisco usually provides a sales forecast for the coming quarter.

During the quarter, Cisco completed the acquisition of Tandberg SA, a Norwegian company that’s a leading maker of corporate teleconferencing gear.

As a maker of capital equipment, Cisco saw a big sales drop during the recession, but its high profit margin and huge cash hoard let it weather the downturn in relative calm. However, it did lay off about 2,000 employees.

WHY IT MATTERS: Cisco’s sales are seen as bellwether of technology spending by large corporations, government agencies and telecommunications service providers. This isn’t just because Cisco is the biggest: its fiscal quarter ends nearly a month after most other companies (May 1, in this case).

Cisco has said it expects to hire a net 2,000 to 3,000 people over the next few quarters.

WHAT’S EXPECTED: Analysts polled by Thomson Reuters expect Cisco to earn 39 cents per share, on sales of $10.2 billion. Cisco has said it expects about $10 billion to $10.3 billion in sales. On Monday, Jefferies & Co. analyst William Choi said the company is likely to exceed both its own and the market’s expectations.

LAST YEAR’S QUARTER: Cisco reported net income of 23 cents per share on revenue of $8.2 billion.

will not be displayed