Cisco Increases Q2 Profit, Stock Flat on the News
Posted on February 5th, 2010
Cisco Systems, Inc. (CSCO), an expert in networking, posted Q2 results on Wednesday after the bell. Judging by the data, the tech company is holding up okay.
The top line saw an increase of 8%. Net income came in at 40 cents per share, a 25% jump compared to the year-ago number. According to our earnings preview, 35 cents per share was the figure to beat. Score one for management.
The team can also be proud of the gross margin. Shareholders, meanwhile, can feel happy about the fact that Cisco is apparently confident in its financial future: $1.5 billion was used to repurchase over 60 million shares during the quarter.
Unfortunately, the statement of cash flows for the six-month period didn’t match the impressive earnings growth. Cash from operating activities took a dive of over 30%. There was still a significant amount of money left over after capital spending and acquisition activities, however. Long-term debt on the balance sheet has increased, although you can interpret that as an investment for the future (and let’s not forget that there’s a lot of cash and investments on the books to compensate for the debt level).
Overall, though, I found the earnings report to be satisfactory. I look favorably upon the two purchases mentioned in the release — Cisco completed the transactions with ScanSafe and Starent Networks — and I perceive the company’s long-term prospects as being strong. As Trey Thoelcke mentioned in his preview, the forecast and valuation on the business is relatively positive.
It was a down day for the markets at large, but Cisco’s shares managed to hold up under all the selling pressure surrounding it. The stock may not have been too hot this trading session, but it’s not far off from a 52-week high, and I don’t perceive a need to ditch it at the moment.
Disclosure: I don’t own any company mentioned; positions can change without notice.
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