Earnings Preview: Cisco expects sales increase
Cisco Systems Inc., the world's largest maker of computer networking equipment, reports its fiscal second-quarter results after the stock market closes Wednesday.
WHAT TO WATCH FOR: Cisco has said it expects to post its first year-over-year sales increase since Jan. 2009, with the improving economy is giving businesses better confidence to invest in information technology upgrades. Recent analyst chatter suggests Cisco may exceed its own forecast for a sales increase of 1 percent to 4 percent from last year, which translates to a range of $9.2 billion to $9.5 billion.
Cisco usually provides a sales forecast for the coming quarter as well.
Analysts, however, are asking whether Cisco still has the ability to generate sales increases that don't reflect growth in the economy. Competition is intensifying in its core business of making routers and switches for heavy-duty data-wrangling.
Cisco, meanwhile, is trying to branch out in a variety of directions. Video is a particular focus, with the recent acquisitions of Tandberg ASA, a Norwegian maker of videoconferencing equipment, and Pure Digital, maker of the popular Flip Video pocket camcorders.
Cisco's high profit margin and huge cash hoard let it power through the recession and make a string of acquisitions, but 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 (Jan. 23, in this case). Also, since it sells capital equipment, its figures tend to be strongly influenced by business cycles. In the worst quarter of the recent recession, sales were down 18 percent from the year before.
WHAT'S EXPECTED: Analysts polled by Thomson Reuters expect Cisco to earn 35 cents per share, on sales of $9.4 billion.
LAST YEAR'S QUARTER: Cisco reported profit of 26 cents per share on revenue of $9.1 billion.