Cisco Stays Solid In Q3 But Weak Q4 Projections Spook


Cisco reported third fiscal quarter results Wednesday that beat analyst expectations, confirming the networking titan has bounced back following a year-long restructuring process.

But, Cisco's stock plunged after hours following disappointing guidance for Q4 and Cisco CEO John Chambers’s types of comments about customer spending trends, which tend to spook analysts who see Cisco as an IT industry bellwether.

Cisco views a "cautious, wait-and-see environment," Chambers said on Cisco's third-quarter earnings conference call.

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For its fiscal Q3, Cisco reported sales of $11.59 billion, up 6.6 percent from $10.9 billion a year earlier and ahead of a Wall Street analyst projected consensus of $11.57 billion. It reported $2.2 billion in Q3 profit, up 19.8 percent over $1.8 billion in the year-ago quarter. Cisco exited the quarter with $48.4 billion in cash and investments, ahead of $46.7 billion in its second quarter.

In Q4, Cisco expects revenue up between 2 and 5 percent, implying revenue of $11.42 billion to $11.8 billion. That was short, however, of the 7 percent -- an implied $11.99 billion -- analysts had projected.

Chambers reiterated several times that Cisco is seeing a cautious environment with smaller deal sizes and lengthier sales cycles. He also voiced disappointment in Cisco's collaboration segment -- a key area of focus for Cisco -- which was flat, although Cisco attributed a slowdown in telepresence sales partially to spending challenges in the public sector.

Throughout the post-earnings discussion, however, Chambers stuck to familiar themes, including that Cisco is No. 1 or No. 2 in all of the technology markets in which it plays, and that the role of the network remains hugely important during the industry paradigm shift toward cloud, video and mobile device use.

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