Cisco Results Top Estimates; CFO To Step Down

(RTTNews) - Cisco Systems, Inc. (CSCO), the world's largest computer networking gear maker, said Wednesday after the markets closed that its first quarter profit fell 8.4% from last year, as higher costs and expenses more than offset a 1.3% increase in revenue.

However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly revenue.

"This was our strongest Q1 ever in terms of revenue, non-GAAP operating income, and non-GAAP EPS," said Cisco chairman and CEO John Chambers. "We continue to make progress towards becoming the #1 IT company in the world. We are still in a tough environment, but seeing encouraging trends as cities, businesses, governments and schools are becoming more digitized."

Additionally, Cisco said that its executive vice president and chief financial officer, Frank Calderoni, has decided to step down, effective January 1, 2015.

The company said it plans to appoint Kelly Kramer, currently the company's senior vice president, Business Technology and Operations Finance, to succeed Calderoni.

Cisco shares are currently losing 1.12% in after hours trading after closing the day's regular trading session at $25.11, down 4 cents. The shares trade in a 52-week range of $20.22 to $26.08.

Cisco is aggressively pursuing the acquisition-led growth strategy, diversifying its business and entering consumer markets. Cisco is viewed as a technology-industry bellwether because it dominates the market for routers and switches. Since the company's latest results are for the full month of October, instead of September for many of the technology giants, they are also seen as an early indicator of industry trends.

For the first quarter ended October 25, 2014, the San Jose, California-based company reported net income of $1.8 billion or $0.35 per share, compared to $2.0 billion or $0.37 per share for the year-ago quarter.

Excluding items, adjusted net income for the first quarter was $2.8 billion or $0.54 per share, compared to $2.9 billion or $0.53 per share in the prior year quarter.

On average, 36 analysts polled by Thomson Reuters expected the company to earn $0.53 per share for the first quarter. Analysts' estimates typically exclude special items.

This marks the fifth straight time in ten quarters that Cisco's profit has declined year over year. The company had been struggling with rising costs that threatened to derail its earnings growth. To reduce costs, the company cut thousands of jobs. Cisco said in August that it would cut up to 6,000 jobs starting in its fiscal first quarter.

Cisco, which makes the routers and switches that direct computer and telecommunications traffic over corporate networks and the Internet, said total revenue for the first quarter rose 1.3% to $12.25 billion from $12.09 billion in the same quarter last year. Thirty-four analysts had a consensus revenue estimate of $12.16 billion for the first quarter.

Product revenue for the quarter grew 0.4% to $9.4 billion, while services revenue for the quarter rose 4.5% to $2.8 billion.

During the first quarter, Cisco repurchased about 41 million shares of common stock for an aggregate purchase price of $1.0 billion. The remaining authorized amount for stock repurchases as of October 25 was about $7.5 billion with no termination date.

Cisco's balance sheet looked rock solid. The company ended the first quarter with cash and cash equivalents and investment of $52.1 billion, compared to $52.1 billion at the end of the fourth quarter and $48.2 billion at the end of the first quarter of fiscal 2014.

During a conference call with analysts, Cisco forecast revenue growth of 4% to 7% and adjusted earnings of $0.50 to $0.52 per share for the second quarter. Analysts currently expect the company to earn $0.53 per share on revenue growth of 8.40% for the second quarter.