Earnings Cheat Sheet: Cisco Systems Spreads Gloom in Tech

Cisco Systems, Inc. (CSCO) is an international company that designs and provides networking and communications technology and services. Cisco employs more than 65,000 people, is headquartered in San Jose, CA, and is one of the world’s largest technology corporations. Cisco offered a dismal outlook that stunned hopeful investors who believed the worst in the technology sector was behind us.

Earnings: Earnings increased 13.3% to $0.34 a share ($1.9 billion) from $0.30 a share ($1.8 billion) last year.

Revenue: Revenue increased 19.2% to $10.75 billion from $9.02 billion last year.

Actual versus Wall Street Expectations: Cisco’s earnings per share of $0.34 fell short of estimates of $0.40 per share.

Notable Stats: During the first quarter of fiscal 2011, Cisco repurchased 113 million shares of common stock under the stock repurchase program at an average price of $22.14 per share for an aggregate purchase price of $2.5 billion. As of October 30, 2010, Cisco had repurchased and retired 3.2 billion shares of Cisco common stock at an average price of $20.83 per share for an aggregate purchase price of approximately $67.5 billion since the inception of the stock repurchase program. The remaining authorized repurchase amount as of October 30, 2010 was $4.5 billion with no termination date.

The international networking giant forecasts revenue growth of 9-12 % in fiscal 2011, well below the 13.1 % average of analyst expectations.

Did You Hear That? “Cisco delivered solid financial results, during a challenging economic environment. While we have seen capital spending moderate in some areas of our business, our execution in the areas we can control and influence speak to the success and relevance of the company’s strategy,” said John Chambers, chairman and CEO, Cisco. “Our position in the market, including continued product innovation, market share momentum and operational excellence, positions us for growth and flexibility well into the future as we strengthen our role as a trusted business partner to our customers.”

“First of all, our view on this guidance is, we are disappointed,” he said. “We are obviously not projecting growth as fast as we would like over the next several quarters,” Chambers told analysts on a conference call.

Commentary: Shares of Cisco (CSCO) were a laggard in the tech sector and after a disappointing guidance, are trading well below their 50 DMA and 200 DMA. The volume on the sell-off today is about eight times the 50 day average which may be indication of distribution from institutional investors. At its current price, CSCO is near 52 week lows. The gloomy guidance spread and brought down other tech firms, instilling fear of weakness in the tech recovery.

Disclosure: No Positions in CSCO