Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Cisco Fits Back in Its Skinny Jeans, Drops $1 Billion in Annual Costs

Cisco Systems has met an important goal of its restructuring. It has reduced its annual operating expenses by $1 billion and it has hit that goal one quarter earlier than predicted.

“We are executing well on our three-year plan to drive earnings faster than revenue. Our operational focus continues to yield positive results — we hit our billion dollar expense reduction a quarter early — and our ongoing innovation enables our customers to solve their critical business needs,” was how CEO John Chambers put it in a statement.

I’m listening to the conference call, and will have a few more highlights. First there’s the guidance for the quarter ahead. Chambers and CFO Frank Calderoni said the company expects revenue to grow in a range between 5 percent and 7 percent year on year, which works out to sales of $11.4 billion to $11.6 billion, which beats the current consensus outlook. Calderoni also said Cisco expects to earn 45 cents to 47 cents a share, the higher of which is two cents higher than the consensus estimate of analysts. Expect some upgrades from analysts tomorrow on that news alone. Gross margins, Calderoni said, are expected to come in between 61.5 percent and 62 percent, which is also a bit higher than the 61.2 percent margin seen this quarter.

During his prepared comments, Chambers also said that while Cisco has been holding back on doing mergers and acquisitions, that may be coming to an end. “We will be more active with mergers and acquisitions in the quarters and years to come,” he said.

Another interesting stat: Chambers said productivity per employee rose 20 percent to $724,000. That tends to happen when the overall number of employees drops — which it has by about 6,500 over the last six months or so. But it’s also an indication that Cisco had some serious operational fat to trim.

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Nobody was excited about paying top dollar for a movie about WikiLeaks. A film about the origins of would have done better.

— Gitesh Pandya of comments on the dreadful opening weekend box office numbers for “The Fifth Estate.”