Cisco Beats Expectations Despite Sales, Net Drop
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Cisco Systems (NASDAQ: CSCO) showed continued bruising due to the slowdown in IT spending but still topped Wall Street estimates for its fourth fiscal quarter.
The company reported non-GAAP net income of $1.8 billion, or $0.31 per share, a 23 percent drop over the same quarter in 2008 but ahead of analyst expectations of $0.29 per share, according to Reuters Estimates. Revenue dipped 17 percent year-over-year to $8.5 billion, in line with estimates.
For the year, Cisco reported net income of $6.1 billion, or $1.05 per share, for the end of fiscal year 2009, which ended on June 30. That's a 23.8 percent drop from fiscal year 2008, when it earned $8.1 billion. Revenue dropped to $36.1 billion, down from $39.5 billion in the previous fiscal year.
Cash flow from operations totaled $2.0 billion for the fourth quarter of fiscal 2009 and the company ended the year with $35 billion in cash and short-term investments, it said. Cisco also said it repurchased 42 million in shares this quarter.
During a conference call with analysts, CEO John Chambers said he was most pleased that Cisco had managed to come through one of the worst economic downturns in recent years in good financial health. The company, like most of its fellow Silicon Valley giant counterparts, has been on an expense reduction kick, cutting around 1,500 to 2,000. It still employs around 65,500 employees worldwide.
"In the quarter, we completed major expense reductions and limited restructuring and are now moving the entire focus of the company toward growth," Chambers said. "When we saw the market starting to change early in fiscal year '09, we made a decision to accelerate our normal process to realign resources rather than go through a broad-based layoff."
Order patterns had been 10 to 15 percent lower sequentially during the year, but in Q4, orders were up 10 percent sequentially, and Chambers felt orders for the first quarter of fiscal year 2010 would also be up 10 percent sequentially.
However, he also said revenues would decrease 15 to 17 percent year-over-year from fiscal Q1 2009 but up 1 percent to 3 percent sequentially.
CFO Frank Calderoni said the only business segment to grow was the services business, which was up 5 percent. All of the other businesses fell by double digits year-over-year. All geographies were down, from 5 percent in Japan to 38 percent in emerging markets. The U.S. was off 13 percent.
However, Q4 sales jumped by double digits in all markets. This was an encouraging sign for Chambers. Fourth quarter had the first positive sequential product order growth for the year and was the only quarter in the company's fiscal year that was anywhere near normal sequential order seasonality.
"While too early to say this is a definite trend and therefore a much-anticipated recovery, the sequential numbers were very solid and more along the line of our normal season quarterly results for the first time in the last four quarters," he said.
"While this is a very important trend, I would want to see the sequential trends continue for several more quarters before I say we've returned to normal business momentum," he added. "No one knows when the upturn will occur but we will continue to prepare for when the upturn does happen."