Cisco boosted profit, sales in Q2 while cutting costs

Cisco's earnings per share rose more than 48 percent from a year earlier

Cisco Systems posted year-over-year gains in revenue and profit for its fiscal second quarter on Wednesday, reporting net sales up 10.8 percent to US$11.5 billion, and said it met a key cost-cutting goal one quarter early.

Cisco earned $0.40 per share according to generally accepted accounting principles (GAAP), up more than 48 percent from the second quarter of 2011. Its non-GAAP profit was $0.47 per share, beating the estimate of $0.43 from analysts surveyed by Thomson Financial. The analysts had forecast sales of $11.23 billion.

"We are executing well on our three-year plan to drive earnings faster than revenue," Chairman and CEO John Chambers said in a press release. "We hit our billion-dollar expense reduction a quarter early," he added.

Wednesday's report covered the second quarter of the company's three-year plan to improve profits, which was laid out at its 2011 financial analyst conference in September. Cisco kicked off the effort after slumping results triggered a 150-day reorganization last year. Among other changes, a company structure based on a set of councils was replaced with a more traditional organization.

Cisco slowed down its usually aggressive acquisition activity during the slump but is now back in the game, Chambers said. The company's ideal buyout target remains the same as before, he said: a company with about 100 engineers and a product about to come to market. It especially likes companies when Cisco's customers recommend the acquisition.

The company's UCS (Unified Computing System) server lineup grew significantly in the second quarter, with revenue up 91 percent from a year earlier and an accumulated customer count of 10,763. With both these servers and the Nexus line of switches, Cisco expects to gain ground in data centers because of virtualization and cloud strategies, Chambers said. The line will blur between servers, networks and storage, which Cisco is addressing through its partnership with EMC and VMware, Chambers said. Overall data-center revenue was up 88 percent.

Routing and switching revenue also grew, though each by only 8 percent. Revenue from service-provider video infrastructure, another key focus at Cisco, grew 23 percent.

Cisco's product orders grew 5 percent in the Americas; 7 percent in Europe, the Middle East and Africa; and 14 percent in Asia-Pacific, including Japan. While orders for enterprise and commercial products each rose 7 percent, and service-provider orders jumped 12 percent, public-sector ordering fell 1 percent amid budget cuts, especially in the U.S., Chambers said.

For the current quarter, Cisco forecast revenue growth of 5 percent to 7 percent and non-GAAP earnings of $0.45 to $0.47 per share.

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