By JORDAN ROBERTSON - AP Technology Writer - Associated Press
Tuesday, November 3, 2009
Cisco Systems Inc. reports its fiscal first-quarter results after the market closes on Wednesday. The following is a summary of key developments and analyst opinion about the period.
OVERVIEW: Cisco, based in San Jose, Calif., is the world's top maker of computer networking gear. But its latest moves show how badly it wants to expand into other areas and beef up its core offerings amid mounting pressure from rivals.
Cisco, which is coming out of the recession with a bigger cash balance than any other technology company, has put its money to use in recent months with several acquisitions.
Cisco announced last month that it is buying Norway's Tandberg ASA, which makes videoconferencing equipment, for $3 billion. The company also is purchasing Starent Networks Corp., a maker of equipment for wireless carriers, for $2.9 billion, and ScanSafe, an Internet security company, for $183 million.
Cisco is pushing into selling servers, a territory dominated by IBM Corp. and Hewlett-Packard Co. The company is even getting into the gadget game, having just bought Pure Digital, which makes the popular Flip Video camera.
Selling networking gear is highly profitable, and Cisco's cash stockpile of $35 billion at the end of July is one reason the company has been able to ride out the recession with relative ease. The company has reined in expenses and laid off about 2,000 employees, though.
The push into ancillary businesses is eroding Cisco's profit margins.
CEO John Chambers said in August that he expects Cisco's gross margin for the fiscal first quarter, which ended Oct. 24, to fall to 64 percent from 65.3 percent the quarter before. Chambers also said at the time that if order trends kept improving, there was a good chance the summer quarter was a "tipping point" and may have marked the bottom of the recession-related downturn for Cisco.
BY THE NUMBERS: Analysts polled by Thomson Reuters expect Cisco to earn 31 cents per share on $8.7 billion in revenue. Last year, the company recorded net income of 42 cents per share excluding items on $10.3 billion in revenue.
ANALYST OPINION: UBS analyst Nikos Theodosopoulos wrote in a note to clients Monday that Cisco has been losing share through 2009 in its core routing and switching markets.
"It remains to be seen if Cisco is able to reverse these trends in the economic recovery, which indeed may be the case, though it is now unclear," Theodosopoulos wrote.
However, Theodosopoulos highlighted Cisco's "strengthening competitive position" with its recent acquisitions. He added UBS expects strong quarterly results from Cisco based on improvement in spending by large corporations, the federal government and "modestly improving" spending by carriers.
STOCK PERFORMANCE: Cisco's stock climbed about 11 percent in its fiscal first quarter.