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John Chambers. By Michael Wuertenberg via Wikimedia Commons

Cisco bucks the trend with modest but solid sales and earnings improvements

Posted By TelecomTV One , 14 November 2012 | 0 Comments | (0)
Tags: Cisco markets Finance sales

Well, I'll be hornswoggled! While the Cisco Kid roams the range on the hunt for those pesky patent trolls (see yesterday's lead story) back on the Barbary Coast his alter ego, John Chambers, is at home behind the counter, in shirtsleeves and suspenders, minding the store and making a success of it, as Martyn Warwick reports.

Analyst expectations were that Mr. Chambers would come out with a somewhat dour and downbeat set of figures for the company's latest Q1, but they were wrong. Despite the pervading gloom elsewhere Cisco recorded modest but solid growth in sales in a tough market and gained extra kudos for holding costs on a tight rein. The CEO also issued a balanced but positive forecast for next year's trading.

Cisco reported sales up by six per cent and earnings up by 18 per cent. Operating expenses, a bone of contention in recent quarters, were contained and reduced by three per cent - to the relief of investors.

The result in the marketplace was a seven per cent hike in Cisco's share price. It rose to US$18 and gave both the company and the market a much needed fillip - since September Cisco's share price had declined by 13 per cent and a further fall had been expected.

But Cisco seems to be bucking the US trend.

Many other equipment manufacturers are finding life particularly tough at the moment and have issued decidedly pessimistic forecasts for the coming year.

In an investor note, Mark McKechnie, an analyst with Evercore Partners, wrote that Cisco’s results are “better than feared, especially given what we have seen from some of their competitors.”

Commenting on the better than expected results, John Chambers said, “As we continue to manage through a challenging macroeconomic environment, we continue to see the benefits of our focus on operational excellence."

That said, the CEO also pointed out that, like every other company on the face of the planet, Cisco is subject to the vagaries of the global economy. John Chambers said the outlook for Europe remains “very challenging.” whilst commerce with the important US federal government is "as tough as we expected.” Cisco's revenues from Uncle Sam are down 15 per cent year-on-year.

However, Mr. Chambers takes some comfort from the fact that US telcos, cablecos and enterprises are starting to spend more on comms equipment and networks - and Cisco is doing well in India, South East Asia and latin America.

Turning to the upcoming Q2, John Chambers says revenue growth will continue and will grow by between three and a half per cent and five and a half per cent as compared to Q2 last year.


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