Cisco Systems, Inc. (CSCO: Quote), the world's largest computer networking gear maker, said Wednesday after the markets closed that its second quarter profit rose 44% from last year, helped by higher sales and hefty tax benefits.
The company's quarterly earnings per share, excluding items, also came in above analysts' expectations as did its quarterly sales.
"Cisco delivered record earnings per share this quarter and record revenue for the 8th quarter in a row in a challenging economic environment. We continue to drive the innovation, quality and leadership our customers expect, and we remain focused on consistent returns to our shareholders," said John Chambers, Cisco chairman and chief executive officer.
Cisco shares are currently losing 3.26% in after hours trading after closing the day's regular trading session at $21.14, up 17 cents. The shares trade in a 52-week range of $14.96 to $21.34.
The latest quarter marks Cisco's fifth consecutive quarter of higher profit following four quarters of year-over-year profit declines.
The company had been struggling with rising costs that threatened to derail its earnings growth. To reduce costs, Cisco cut thousands of jobs. The company said in July that it will cut about 1300 jobs, or about 2% of its global workforce, as part of a continuous process of simplifying the company as well as assessing the economic environment in certain parts of the world. It was in July 2011 that Cisco said it would eliminate nearly 6,500 jobs globally in an attempt to cut mounting costs.
For the second quarter ended January 26, 2013, the San Jose, California-based company reported net income for the second quarter of $3.1 billion or $0.59 per share, compared to $2.2 billion or $0.40 per share for the year-ago quarter.
Excluding items, adjusted net income for the second quarter was $2.7 billion or $0.51 per share, compared to $2.6 million or $0.47 per share in the prior year quarter.
The latest quarter net income includes total tax benefits of about $926 million or $0.17 per share, related to a tax settlement with the Internal Revenue Service and related to the reinstatement of the U.S. federal research and development tax credit. The latest quarter adjusted net income includes a tax benefit of about $60 million or $0.01 per share as a result of the reinstatement of the U.S. federal R&D tax credit.
On average, 36 analysts expected the company to earn $0.48 per share for the second quarter. Analysts' estimates typically exclude special items.
Cisco, which makes the routers and switches that direct computer and telecommunications traffic over corporate networks and the Internet, said net sales for the second quarter rose 5% to $12.10 billion from $11.53 billion in the same quarter last year. Thirty-five analysts had a consensus revenue estimate of $12.06 billion for the second quarter.
Product sales for the quarter increased 3.5% to $9.4 billion, while services revenue for the quarter grew 10.4% to $2.7 billion.
During the second quarter, Cisco repurchased about 25 million shares of common stock for $500 million. As of January 26, the company had repurchased and retired 3.8 billion shares for an aggregate purchase price of about $76.9 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under the program is about $5.1 billion with no termination date.
Cisco's balance sheet looked rock solid. The company ended the second quarter with cash and cash equivalents and investment of $46.4 billion, compared to $45.0 billion at the end of the prior quarter and $48.7 billion at the end of fiscal 2012.
Cisco is aggressively pursuing the acquisition-led growth strategy, diversifying its business and entering consumer markets. During the quarter, Cisco announced the acquisition of Cloupia, Inc., Meraki, Inc., Cariden Technologies, Inc. and BroadHop, Inc.
Also during the quarter, Cisco agreed to sell its home networking business unit to privately-held Belkin. Financial terms of the deal were not disclosed.
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 January, instead of December for many of the technology giants, they are also seen as an early indicator of industry trends.
Juniper Networks, Inc. (JNPR), which competes with Cisco in the router industry, last month reported fourth quarter profit fell slightly from last year, as higher operating expenses offset a modest revenue growth. However, the company's quarterly earnings per share, excluding items, came in above analysts' expectations as did its quarterly revenue. At the same time, the company gave a downbeat revenue outlook for the first quarter.
by RTT Staff Writer
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