Cisco Systems Inc forecast slim revenue growth this quarter, a pleasant surprise to investors bracing for a sharp pullback in global technology spending that sent its shares soaring 10 percent.
The world leader in Internet networking equipment predicted in-line sales growth of 1 percent to 4 percent this quarter after posting quarterly results on Wednesday that edged past Wall Street’s scaled-back expectations.
Analysts took that as an early sign that tough measures to return the Silicon Valley giant to growth — including layoffs and asset sales — were taking hold. Some feared Cisco would follow rivals Juniper Networks Inc and Brocade Communications Systems Inc in slashing results forecasts.
“The guidance was in-line — which was much better than feared,” said Sterne Agee analyst Shaw Wu. “There were expectations that they would guide down like most of their smaller peers.”
Cisco shed about one-third of its market value this year, punished by flagging growth and the loss of market share to aggressive rivals like Juniper.
The erstwhile stock-market darling, which depends on government spending for about one-fifth of its revenue, said last month it would cut 15 percent of its workforce and sell a set-top box factory in Mexico in an effort to slash annual expenses by US$1 billion.
Cisco CEO John Chambers told analysts he foresaw “gradual improvement” in the business, while warning again of challenges for the global public sector spending in coming quarters.
That came after the company racked up better-than-expected sales, profit and margins in the fiscal fourth quarter, which ended last month. Revenue in the quarter grew 3 percent from last year to US$11.2 billion — about US$300 million above analyst estimates.
Gross margins came in at 62.7 percent, dipping from 63.9 percent in the fiscal third quarter, but ahead of analysts’ projections for under 62 percent.
And net income slid 36.3 percent to US$1.2 billion or US$0.22 a share, from US$1.9 billion or US$0.33 a share a year earlier. Excluding certain items, it earned US$0.40 share, just above the US$0.38 expected on average.
Cisco expects its revenue for the current quarter ending in October to increase by 1 percent to 4 percent from the same year. That projection implied revenue of US$10.86 billion to nearly US$11.2 billion. Analysts had been expecting revenue for US$10.94 billion.
Chambers indicated the company low-balled its fiscal first-quarter revenue estimates because of the economic uncertainty.
“I feel very confident about [the quarter] in terms of what we can control and influence,” he said.
For its full fiscal year, Cisco earned US$6.5 billion, or US$1.17 per share, on revenue of US$43.2 billion. That compared to net income of US$7.8 billion, or US$1.33 per share, on revenue of US$40 billion in the prior year.