Its shares rose 11 percent to $11.45 in after-hours trading.

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Separately, HP just filed an 8-K with the U.S. Securities and Exchange Commission concerning a restructuring plan. It reads in part:

As part of the restructuring plan, HP expects approximately 27,000 employees, or approximately 8% of the company’s workforce as of October 31, 2011, to exit the company by the end of fiscal 2014, with a portion of those employees exiting the company as part of a voluntary early retirement program for U.S. employees whose combined age and years of service exceed certain levels. The total number of employees ultimately affected will be impacted by the number of employees that opt to participate in the early retirement program. The changes to HP’s workforce will vary by country, based on local legal requirements and consultations with employee works councils and other employee representatives, as appropriate.

In connection with the restructuring plan, HP expects to record aggregate pre-tax charges of approximately $3.5 billion through the end of HP’s 2014 fiscal year beginning in the third quarter of HP’s 2012 fiscal year. Of that amount, HP expects approximately $3.0 billion to relate to the workforce reductions and approximately $0.5 billion to relate to other items, including data center and real estate consolidation. HP expects approximately $2.7 billion of those aggregate pre-tax charges to result in cash expenditures during the term of the plan. HP expects to amend its U.S. pension plans to facilitate the funding of a portion of the cash expenditures using available U.S. pension plan assets.

HP has now posted a news release with some details on the restructuring plan:

The idea is apparently to get things under way in the third quarter of this year, which is the current quarter, and to take charges of $3.5 billion by the end of 2014, most of it in workforce reductions. That is in line with CEO Meg Whitman’s claim that the turnaround is going to take a few years. The 27,000 jobs eliminated amount to about 8 percent of the workforce. Of that, HP will take a $1.7 billion pre-tax charge this year.

There’s also going to be some “SKU rationalization,” which is something I’ve written about before. Look for some products to get axed around this.

“While some of these actions are difficult because they involve the loss of jobs, they are necessary to improve execution and to fund the long term health of the company. We are setting HP on a path to extend our global leadership and deliver the greatest value to customers and shareholders,” Whitman said in a statement.

As AllThingsD also told you last week, the changes will be made in order to reinvest in things like research and development, one area that’s widely thought to have suffered too much in the last decade or so. There will also be investments in services, software and enterprise hardware.

Another surprise: Mike Lynch, the CEO of Autonomy, the British software company that HP paid $12 billion for last year and which was seen as an albatross around the neck of prior CEO Léo Apotheker, is stepping down. He’s not the only one, as other former CEOs of software companies that HP has acquired also have departed about a year later. Bill Veghte, HP’s chief strategy officer and executive vice president of HP Software, will run Autonomy. I had been hearing rumblings that Lynch would be leaving, but was never able to track it down.

Here’s the earnings announcement. I’ll have more as I go through it.

HP Reports Second Quarter 2012 Results
PALO ALTO, CA–(Marketwire -05/23/12)- HP (HPQ)

Second quarter non-GAAP diluted earnings per share of $0.98, above previously provided outlook of $0.88 to $0.91 per share
Second quarter GAAP diluted earnings per share of $0.80, above previously provided outlook of $0.68 to $0.71 per share
Second quarter net revenue of $30.7 billion, down 3% from the prior-year period
Returned $601 million in cash to shareholders in the form of dividends and share repurchases
Company announces multi-year restructuring to fuel innovation and enable investment — see separate press release for details

HP second quarter fiscal 2012 financial performance
Q2 FY12 Q2 FY11 Y/Y
GAAP net revenue ($B) $30.7 $31.6 (3%)
GAAP operating margin 7.2% 9.4% (2.2 pts.)
GAAP net earnings ($B) $1.6 $2.3 (31%)
GAAP diluted EPS $0.80 $1.05 (24%)
Non-GAAP operating margin 8.9% 11.3% (2.4 pts.)
Non-GAAP net earnings ($B) $1.9 $2.7 (28%)
Non-GAAP diluted EPS $0.98 $1.24 (21%)

Information about HP’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.

HP (HPQ) today announced financial results for its second fiscal quarter ended April 30, 2012. For the quarter, net revenue of $30.7 billion was down 3% year over year both as reported and when adjusted for the effects of currency.

GAAP diluted earnings per share (EPS) was $0.80, down 24% from the prior-year period. Non-GAAP diluted EPS was $0.98, down 21% from the prior-year period. Second quarter non-GAAP earnings information excludes after-tax costs of $356 million, or $0.18 per diluted share, related to amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

“We are making progress in our multi-year effort to make HP simpler, more efficient and better for customers, employees, and shareholders,” said Meg Whitman, HP president and chief executive officer. “This quarter we exceeded our previously provided outlook and are executing against our strategy, but we still have a lot of work to do.”

Business Group Results

Personal Systems Group (PSG) revenue was flat year over year with a 5.5% operating margin. Commercial revenue increased 3%, and Consumer revenue declined 4% while Workstations revenue was down 1% year over year. Desktop units were up 5%, notebook units were down 6% and total units were down 1%.
Services revenue declined 1% year over year with an 11.3% operating margin. Technology Services revenue was flat year over year, Application and Business Services revenue grew 1% and IT Outsourcing revenue declined 3% year over year.
Imaging and Printing Group (IPG) revenue declined 10% year over year with a 13.2% operating margin. Commercial hardware revenue was down 4% year over year with commercial printer units down 7%. Consumer hardware revenue was down 15% year over year with a 13% decline in printer units.
Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% year over year with an 11.2% operating margin. Networking revenue was up 2%, Industry Standard Servers revenue was down 6%, Business Critical Systems revenue was down 23%, and Storage revenue was up 1% year over year.
HP Financial Services revenue grew 9% year over year driven by a 4% increase in net portfolio assets and a 5% increase in financing volume. The business delivered a 9.9% operating margin.
Software revenue grew 22% year over year with a 17.7% operating margin, including the results of Autonomy. Software revenue was driven by 7% license growth, 17% support growth, and 72% growth in services. Autonomy saw a significant decline in license revenue.

To help improve Autonomy’s performance, Bill Veghte, HP’s chief strategy officer and executive vice president of HP Software, will step in to lead Autonomy. Veghte is an experienced software leader who will help develop the right processes and discipline to scale Autonomy and fulfill its promise. Mike Lynch, Autonomy’s founder and executive vice president for Information Management, will leave HP after a transition period. The market and competitive positioning for Autonomy remain strong, particularly in cloud offerings.

Asset Management
HP generated $2.5 billion in cash flow from operations in the second quarter. Inventory ended the quarter at $7.3 billion, with days of inventory up 2 days year over year to 28 days. Accounts receivable of $16.6 billion was down 4 days year over year to 49 days. Accounts payable ended the quarter at $12.9 billion, down 5 days from the prior-year period to 49 days. HP’s dividend payment of $0.12 per share in the second quarter resulted in cash usage of $251 million. HP also utilized $350 million of cash during the quarter to repurchase approximately 13 million shares of common stock in the open market. HP exited the quarter with $8.7 billion in gross cash.

Outlook
In connection with the restructuring efforts discussed in a separate press release issued today (http://www8.hp.com/us/en/hp-news/press-release.html?id=1247078), HP expects to record a pre-tax charge of approximately $1.7 billion in fiscal 2012 that will be included in its GAAP financial results for that period. Of that amount, HP expects to record a pre-tax charge of approximately $1.0 billion in its third fiscal quarter. The cash impact associated with the restructuring efforts is expected to be approximately $400 million in fiscal year 2012. Through fiscal 2014, HP expects to record additional pre-tax charges approximating $1.8 billion that will be included in its GAAP financial results for the applicable periods.

In May 2012, HP committed to a change in its PC branding strategy. As a result, HP has commenced an asset impairment analysis to determine the current value of the Compaq trade name acquired in 2002. Based on the preliminary results of that analysis, HP expects to record an impairment charge of up to approximately $1.2 billion that will be included in its GAAP financial results for its third fiscal quarter. There will be no cash impact associated with the impairment charge.

For the third quarter of fiscal 2012, HP estimates non-GAAP diluted EPS to be in the range of $0.94 to $0.97 and GAAP diluted EPS to be in the range of $0.00 to $0.03.

Third quarter fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.94 per share, related primarily to the amortization and impairment of purchased intangible assets, restructuring charges, and acquisition-related charges.

For the full year fiscal 2012, HP now estimates non-GAAP diluted EPS to be in the range of $4.05 to $4.10 and GAAP diluted EPS to be in the range of $2.25 to $2.30.

Full year fiscal 2012 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.80 per share, related primarily to the amortization and impairment of purchased intangible assets, restructuring charges and acquisition-related charges.

More information on HP’s quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at www.hp.com/investor/home.

HP’s Q2 FY12 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2012q2webcast.

The world’s No. 2 PC maker by shipments after Hewlett-Packard Co. said its world-wide PC shipments rose 44 percent in the quarter ended March 31, compared with a 5 percent industrywide increase. Its profitability has outpaced that of rivals Dell Inc. and HP as the Chinese company has targeted fast-growing emerging markets while its two rivals have revamped their businesses to move away from low-margin PC production. The global PC industry has taken a hit in recent years as users have increasingly traded their computers for smartphones and tablet computers.

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The consensus among Wall Street analysts calls for HP to report sales of $29.92 billion and a per-share profit of 91 cents. And, for the most part, analysts are expecting HP’s results to be in line with expectations, if maybe a little light on sales.

One possible curveball, however, is Europe. Given HP’s exposure to the faltering markets on that continent, about which Dell complained in its earnings report yesterday, HP could conceivably see its results hurt more by Europe than by Dell.

Europe accounts for 37 percent of HP’s revenue, making it the most heavily exposed there among the large IT vendors. “The increasing uncertainty and resulting macro weakness in Europe will likely act as an ongoing headwind to growth,” wrote analyst Chris Whitmore of Deutsche Bank Securities in a note to clients Tuesday.

But the big item on the agenda will be HP’s plans for restructuring, and how many jobs may be lost. As AllThingsD reported last week, HP is contemplating a restructuring that could see as many as 30,000 jobs eliminated, including 5,000 through voluntary retirements. What’s unclear is over what length of time these jobs will go — I’ve been told by sources that this is a key detail, and it is likely to be a fairly long period of time.

The reductions would be the latest in a long, painful sequence of cuts for HP that began years ago. Whitmore notes that HP chopped 50,000 jobs over the course of five years under the tenure of former CEO Mark Hurd. “We suspect HP will position this cost cutting as ‘cut to reinvest’ — an interesting strategy considering HP has been restructuring for the past decade,” Whitmore writes.

Whatever restructuring Whitman puts on the table, Whitmore expects it will help HP maintain its prior guidance — it expects to finish the year with a per-share profit north of $4.00 — but it’s still not going to be easy. Summer PC demand is expected to be soft, and the lack of a tablet strategy isn’t helping. Demand for corporate PCs will likely be a rare bright spot, but just barely.

In printers, the relatively weak results of printer concerns Canon and Lexmark don’t exactly imbue the market with confidence that the trend of sliding profits and sales in HP’s printer operation, recently combined with the Personal Systems Group in a sweeping reorganization announced last month, is anywhere close to being reversed.

One thing to watch for — and something about which Whitman has hinted in the past — is SKU reduction. An SKU is industry lingo for “stock-keeping unit,” and it refers to specific models and makes and packages of a given product. Consumer printers — and, in fact, printers in general — would be an obvious place to cut back on the number of models offered to the market, and it would be perfectly in line with Whitman’s prior messages emphasizing simplicity and streamlining HP’s approach to the market. While I don’t expect Whitman to go on at length about this subject, it’s the sort of thing she may touch on as she hones the “simplicity” message.

What not to expect: One big bomb dropped all at once, outlining the sum total of Whitman’s long-term strategy for HP — one she has already admitted will take a long time to implement. The fact is, it’s a big job, probably one of the biggest in all of the corporate world, and so it’s necessarily coming out in pieces. Today’s piece will be a big one.

The world’s third-biggest PC maker gave a forecast for gain in sales of 2 percent to 4 percent in the current quarter, which would top out at $15 billion, fully $400 million short of what Wall Street analysts had expected.

That outlook came on top of sales in the quarter just ended that declined 4 percent to $14.4 billion, amounting to a miss of a half billion from the Street consensus. Per-share earnings were 43 cents, also short of expectations by three cents. It was the second miss in a row for Dell.

Naturally, Dell shares are getting spanked. As of 3 pm PT, they’re down almost 12 percent, at $13.33 a share. And the damage isn’t limited to Dell. Hewlett-Packard, which reports earnings tomorrow, is down in after-hours trading by 56 cents, or nearly 3 percent, to $21.22 a share.

However, the company, which showed strength in online sales and its mobile-phone segment, affirmed its full-year outlook.

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That’s an easy one: Kayak.com.

The travel search company, which has been putting off its plans to go public for more than a year and a half, is now getting ready to pull the trigger, according to sources.

The Norwalk, Conn.-based company is by default one of the prime candidates to go public because it has already filed its paperwork and has been dutifully updating its financial statements with the Securities and Exchange Commission every quarter.

A Kayak spokesperson declined to comment, but the timing is good for a number of reasons.

Not only has Facebook priced at the high end of its range, which makes investors a bit more hungry for tech stocks, but other travel companies have been warmly received by the markets over the past few months.

In December, TripAdvisor spun off from Expedia to become an independently held public company. Since then, the company’s stock has soared, trading at $41 a share, up from $27 a share. Expedia is also trading higher, up 50 percent to $41.10 a share.

Kayak could begin its roadshow as soon as Monday and may be seeking as much as $150 million at a $1 billion valuation, according to CNBC. In its original documents, it said it would raise a minimum of $50 million, which served more as a placeholder than what it was intending on raising.

As recently as last week, it updated its filing to report its first quarter earnings, announcing that it earned $4.1 million on $73.3 million. In the year-ago period, it recorded a lost of $6.9 million on revenues of $52.7 million.

Apparently the final reassurance analysts and investors were looking for was that the company is indeed still growing.

Despite taking several measures over the past couple of months in the wake of an awkward fourth-quarter earnings revision, Groupon has not been able to regain investor confidence and has watched its stock price slowly dwindle to half its IPO price of $20 a share.

Today, the company’s stock opened at $14.93 a share before settling at $12.17 at the close, up 3.7 percent.

At least two analysts were bullish on yesterday’s first-quarter results, upgrading Groupon’s stock to a buy.

Sterne Agee upgraded Groupon from neutral to a buy and set a price target of $20. In a note to investors, analysts Arvind Bhatia and Brett Strauser wrote that the strong first quarter “alleviated several concerns,” including Groupon’s ability to have operating leverage. An additional plus, they wrote, is that the stock is trading so far below its IPO price.

Likewise, Mark Mahaney from Citi wrote that “we’ll grab this deal,” and upgraded the stock to a buy with a $22 price target. Four factors drove his decision: 33 percent quarter-over-quarter revenue growth in North America, international margins turning positive for the first time, marketing spending declining for the fourth quarter in a row and the very low stock price.

As my colleague Ina Fried reported yesterday, Groupon’s first-quarter revenues topped the company’s prior forecast as well as analyst expectations, totaling $559.3 million during the period, compared with $295.5 million a year ago. Operating income was $39.6 million, including an expense of $28 million related to non-cash stock-based compensation.

The strong results helped overshadow the company’s previous follies, which included the financial revision in the fourth quarter due to higher than expected holiday returns and the disclosure that auditors had determined it had a material weakness in its financial processes.

In a conference call with analysts, Groupon’s CFO Jason Child, who is under fire over the gaffes, said: “There’s some specific tasks that we have implemented and are going to implement. We’ve certainly added some people, and have some more work there. We have 48 countries and so we do have accounting personnel and controllers in every single country.”

In addition, Groupon has taken several precautions over the past couple of months to ensure the mishaps won’t happen again.

For example, Groupon has hired Kal Raman to build out the company’s internal controls and processes as the SVP of Americas. He previously held executive roles at Amazon, eBay and Drugstore.com. Groupon also nominated two new members with accounting prowess to the board and has been working on its financial controls.

Child said that since being tripped by holiday returns, the company has implemented a more granular statistical model that maps returns on a weekly basis.

“From a process standpoint we are in good shape, and there’s some technology that is especially helpful with a company like ours,” he said. “We made a lot of progress this quarter, and will make a lot of progress next quarter, and hopefully in the next quarter or two, we’ve done all the steps necessary.”

Groupon’s auditors won’t review whether the company has rectified its financial processes until the end of the year, so even if the company moves faster the label will remain.

In a recent letter to shareholders, Groupon’s CEO Andrew Mason said he did not have regrets on moving too fast.

“Although there are risks in moving too fast, companies often don’t survive long enough to apologize for moving too slow,” Mason writes. “Perhaps more importantly, by moving quickly, we reached a scale that has helped us solidify our market leadership, and accumulated data that is enabling our future and helping us continuously improve the experience of our customers.”

The Chicago-based company, which has had a bumpy road of late, said that it took in $559.3 million in revenue during the first quarter 2012, compared with $295.5 million a year ago. Operating income was $39.6 million, including an expense of $28 million related to non-cash stock-based compensation.

The company had said to expect revenue of up to $550 million, and net income from operations of up to $35 million.

“We are pleased to report a record quarter that demonstrates our progress in unlocking the opportunity in local commerce for merchants and customers worldwide,” CEO Andrew Mason said in a statement.

The company posted a per-share loss of two cents, though excluding various items, it would have earned two cents per share, in line with analysts’ forecasts.

The report comes as the deal-making service faced tough times as it has had to restate fourth quarter earnings amid what it said were a large number of post-holiday returns. In the aftermath, the company has shuffled around its board of directors, bringing in some new outside expertise.

In a letter to shareholders earlier this month, Mason defended the company’s efforts to move quickly in a fast-changing market.

Looking forward, Groupon said to expect second quarter revenue of between $550 million and $590 million, with income from operations in the range of $25 million and $45 million.

In slides accompanying the earnings report, Groupon noted that its customer base continues to grow, with 36.9 million active customers versus 33.7 million a quarter earlier. Marketing spend as a percentage of revenue, meanwhile, dropped to 21 percent from 32 percent in the same period.

The company’s stock has lost as much as half its value since going public late last year at $20 a share. However, shares traded up strongly on Monday ahead of the earnings report. Just before the close of regular trading, shares were at $11.63, up $1.73, or more than 17 percent.

Nvidia said it expects sales in the second quarter to come in between $990 million and $1.05 billion, well ahead of the the $976 million analysts had forecast.

And the cheerful forecast came on top of earnings that also beat expectations. Sales in the first quarter fell to $925 million from $962 million a year earlier, which, despite the drop, was better than the $916 million consensus.

Nvidia’s profits were $60 million, or 10 cents on a per-share basis, which was also a drop from 22 cents in the year-ago period. A rather hefty fall at that, but it was in line with expectations.

It looks like Nvidia is scoring some important wins in the desktop space, now that Windows 8 — which supports variants of ARM-based chips and not just x86-type chips from Intel and Advanced Micro Devices — is coming. Also, notebook graphics chips are growing. Nvidia also landed a version of its Tegra chip inside a phone from HTC that launched with 22 carriers in Europe and Asia.

Panasonic recorded a net loss of ¥438.4 billion ($5.49 billion) in the three months ended March 31 compared with a loss of ¥40.7 billion in the same period a year earlier. Sales fell 8 percent to ¥1.880 trillion in the quarter, hurt by soft demand for flat-panel televisions and mobile phones.

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For the year ending next March, the Japanese electronics giant Thursday forecast a net profit of ¥30 billion ($376 million), an operating profit of ¥180 billion and a 14 percent rise in revenue to ¥7.4 trillion. Sony said it expects major improvements in its camera, personal-computer and component businesses, hurt last year by the earthquake and tsunami in Japan as well as the flooding in Thailand, an important production center.

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The former German state telecommunications monopoly said revenue in the three months ended March 31 slipped 1.1 percent on the year to €14.43 billion as it continues to struggle with the economic headwinds in many parts of Europe. Earnings before interest, taxes, depreciation, amortization and one-time items, a number that tracks operational performance, remained unchanged at €4.48 billion, slightly ahead of analysts’ predictions.

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Net income jumped to $937 million, or 38 cents a share, for the fiscal third quarter, compared with net income of $639 million, or 24 cents a share, a year earlier. Revenue rose 2 percent to $8.4 billion.

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The company said both revenues and earnings exceeded its expectations for the quarter, even though they were down from the year-ago period.

In the first quarter, Activision recorded a profit of 33 cents a share on revenues of $1.17 billion. Those results beat its internal forecast of 22 cents a share on revenues of $965 million, but is down compared to the first quarter 2011 when it reported a profit of 42 cents a share on revenues of $1.45 billion.

Due to a better-than-expected quarterly performance, the Santa Monica-based game maker said it was raising its guidance for the year to a profit of 65 cents a share on revenues of $4.2 billion, an increase of two cents and $50 million respectively.

In a release, Activision’s CEO Bobby Kotick pointed to strong demand for Call of Duty: Modern Warfare 3, Skylanders Spyro’s Adventures as well as Blizzard Entertainment’s World of Warcraft for the better-than-expected results.

In particular, analysts were eager to see how World of Warcraft performed with the introduction of Electronic Arts’ Star Wars: The Old Republic. Activision said the number of subscribers for WoW, the online massively multiplayer game, held steady at 10.2 million subscribers at the end of the first quarter compared to the end of the year.

On a non-GAAP basis, which excludes some items, Activision said it earned a profit of 6 cents a share on revenues of $587 million.

Analysts were expecting the company to earn four cents on revenues of $555.9 million, according to First Call.

In after hours trading, the company’s shares were up 10 cents, or nearly 1 percent, to $12.40 a share on the report.

Revenues were $11.6 billion, up 6.6 percent from the year-ago quarter, while per-share earnings on a non-GAAP basis were 48 cents, versus 42 cents a year ago, up 14 percent. That’s essentially right in line with what the consensus of Wall Street analysts had expected Cisco to report: $11.58 billion in sales, and 47 cents in per-share of earnings, with a penny-per-share beat on the EPS front.

I’m going quickly through the numbers, but here’s the announcement in full so you can look for yourselves. I’ll be dialing in to the conference call shortly and will be talking to CEO John Chambers after that.

Cisco shares are headed lower in after-hours trading. As of 4:45 pm ET, shares are down 48 cents to $18.30, or 2.5 percent.

Update: Cisco just issued its guidance on the conference call. CFO Frank Calderoni says that Cisco expects to report revenue to grow 2 percent to 5 percent year over year in the fourth quarter. It also expects to earn a gross margin in the range of 61 percent to 62 percent on a non-GAAP basis. Operating margins should be 26.5 percent to 27.5 percent, up about a point from the year-ago quarter. EPS will be 44 to 46 cents a share. The outlook is lower than the consensus of 49 cents.

On this, the shares have continued to fall after hours. Cisco shares are now, as of 5:02 pm ET, down more than 8 percent, or $1.55, to $17.23. Investors clearly don’t like what they see. Tomorrow looks like it’s going to be a rough day.

SAN JOSE, CA–(Marketwire -05/09/12)- Cisco (CSCO)

Q3 Net Sales: $11.6 billion (increase of 7% year over year)

Q3 Net Income: $2.2 billion GAAP (increase of 20% year over year); $2.6 billion non-GAAP (increase of 11% year over year)

Q3 Earnings per Share: $0.40 GAAP (increase of 21% year over year); $0.48 non-GAAP (increase of 14% year over year)

Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 28, 2012. Cisco reported third quarter net sales of $11.6 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.2 billion, or $0.40 per share, and non-GAAP net income of $2.6 billion, or $0.48 per share.

“We delivered solid results this quarter with record revenue and non-GAAP earnings per share,” said John Chambers, Cisco chairman and CEO. “We are successfully executing against our long-term strategic plan of growing profit faster than revenue, and in a cautious IT spending environment, we continue to outperform our competitors.”

Chambers continued, “In a world of clouds, video and mobile device proliferations, the role of the intelligent network has never been greater and our value proposition with our customers is the strongest it has ever been. Our vision and strategy is focused on the right market transitions, and I want to thank our shareholders, employees, customers and partners for their ongoing commitment to Cisco.”

GAAP Results

Q3 2012 Q3 2011 Vs. Q3 2011
—————- —————- —————
Net Sales $ 11.6 billion $ 10.9 billion 6.6%
Net Income $ 2.2 billion $ 1.8 billion 19.8%
Earnings per Share $ 0.40 $ 0.33 21.2%

Non-GAAP Results

Q3 2012 Q3 2011 Vs. Q3 2011
————— ————— —————
Net Income $ 2.6 billion $ 2.3 billion 10.9%
Earnings per Share $ 0.48 $ 0.42 14.3%

Net sales for the first nine months of fiscal 2012 were $34.4 billion, compared with $32.0 billion for the first nine months of fiscal 2011. Net income for the first nine months of fiscal 2012, on a GAAP basis, was $6.1 billion, or $1.13 per share, compared with $5.3 billion, or $0.94 per share, for the first nine months of fiscal 2011. Non-GAAP net income for the first nine months of fiscal 2012 was $7.5 billion, or $1.38 per share, compared with $6.8 billion, or $1.22 per share, for the first nine months of fiscal 2011.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 5.

Cisco will discuss third quarter results and business outlook in a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Other Financial Highlights

Cash flows from operations were $3.0 billion for the third quarter of fiscal 2012, compared with $3.1 billion for the second quarter of fiscal 2012, and compared with $3.0 billion for the third quarter of fiscal 2011.

Cash and cash equivalents and investments totaled $48.4 billion at the end of the third quarter of fiscal 2012, compared with $46.7 billion at the end of the second quarter of fiscal 2012, and compared with $44.6 billion at the end of fiscal 2011.

During the third quarter of fiscal 2012, Cisco repurchased 27 million shares of common stock under its stock repurchase program at an average price of $20.28 per share for an aggregate purchase price of $550 million. As of April 28, 2012, Cisco had repurchased and retired 3.6 billion shares of Cisco common stock at an average price of $20.47 per share for an aggregate purchase price of approximately $74.3 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $7.7 billion with no termination date. During the third quarter of fiscal 2012, Cisco also paid a cash dividend of $0.08, or $432 million.

Days sales outstanding in accounts receivable (DSO) at the end of the third quarter of fiscal 2012 were 31 days, compared with 31 days at the end of the second quarter of fiscal 2012, and compared with 37 days at the end of the third quarter of fiscal 2011.

Inventory turns on a GAAP basis were 11.5 in the third quarter of fiscal 2012, compared with 11.1 in each of the second quarter of fiscal 2012 and the third quarter of fiscal 2011. Non-GAAP inventory turns were 11.1 in the third quarter of fiscal 2012, compared with 10.8 in the second quarter of fiscal 2012, and compared with 10.3 in the third quarter of fiscal 2011.

Select Global Business Highlights

Cisco announced its intent to acquire NDS Group Ltd., a provider of video software and content security solutions. The acquisition is expected to help Cisco’s ability to transform how service providers and media companies deliver next-generation video experiences to subscribers.
Cisco completed the acquisition of privately held Lightwire, Inc. Lightwire develops advanced optical interconnect technology for high-speed networking applications. The acquisition is expected to allow Cisco to deliver cost-effective, high-speed networks with the next generation of optical connectivity.
Cisco acquired privately held ClearAccess, Inc. The acquisition enhances Cisco’s network management capabilities and enables service providers to better deliver, manage and monetize their services.
Cisco announced strategic investments in Brazil to foster innovation, transformation and socio-economic development.

Cisco Innovation

Cisco announced it has updated its cloud-ready switching portfolio to enhance network virtualization with simplicity and scale.
Cisco announced a successful demonstration and validation of its coherent 100G dense wavelength division multiplexing solution, exceeding 3,000 km in reach without the need for regeneration. This distance is 50 percent farther than any non-Raman alternative solution on the market today.
Cisco introduced the industry’s first carrier-grade, end-to-end Wi-Fi infrastructure to deliver next-generation hotspots. The technology is designed to deliver seamless mobile experiences and enables operators to support a continuing expansion of mobile traffic, devices and new services.
Cisco announced innovations across the Cisco Unified Computing System® (UCS) that quadruple memory capacity, double switching capacity and simplify management for large-scale Cisco UCS® deployments.
Cisco introduced new Linksys Smart Wi-Fi Routers with app-enabled capabilities for new home experiences. The three new routers offer wireless performance and support for Cisco Connect® Cloud.
Cisco announced it expanded its small business product portfolio with new wireless access points, routers, switches, unified communications and partner-managed service offerings.
Cisco and NetApp announced FlexPod was the first data center infrastructure solution to be validated by Microsoft for the updated Microsoft Private Cloud Fast Track 2.0 program.

Select Customer Announcements

TELUS announced it has deployed key components of the Cisco Videoscape™ platform to extend its Optik TV services to mobile devices.
Cisco announced it has been chosen by Fastway Transmissions Private Ltd. to facilitate cable digitization deployment across its customer base in India. Fastway is expected to deploy more than two million next-generation digital set-top boxes from Cisco during the next two years.
Magyar Telekom rolled out 4G LTE services with Cisco mobile internet solutions. Magyar Telekom is Hungary’s largest telecommunications company.
IPLAN chose Cisco technology for its newest data center which is expected to be launched in June 2012. IPLAN is a leader in telecommunications and cloud computing services for small and medium-sized businesses in Argentina.
Videotron launched its enhanced illico digital TV service with Cisco’s HD set-top box platform. Videotron is a leading Canadian telecommunications operator providing communications and broadband entertainment services.
Peru Credit Bank implemented the Cisco Unified Communications system to increase business flexibility and reduce costs.
Kabel Deutschland (KD) selected Cisco CRS-3 routers for its Internet Protocol Next-Generation Network core to meet demand for video and broadband services. KD is Germany’s largest cable operator.
Netelligent announced that it will collaborate with Desktone, Inc. to offer cloud-hosted virtual desktops. These cloud-based solutions will include Cisco UCS, the Desktone desktops-as-a-service (DaaS) platform and NetApp storage systems.

Editor’s Note:

Q3 FY 2012 conference call to discuss Cisco’s results along with its business outlook will be held at 1:30 p.m. Pacific Time, Wednesday, May 9, 2012. Conference call number is 888-848-6507 (United States) or 212-519-0847 (international).
Conference call replay will be available from 4:30 p.m. Pacific Time, May 9, 2012 to 4:30 p.m. Pacific Time, May 16, 2012 at 866-493-8039 (United States) or 203-369-1749 (international). The replay also will be available via webcast from May 9, 2012 through July 20, 2012 on the Cisco Investor Relations website at http://investor.cisco.com.
Additional information regarding Cisco’s financials, as well as a webcast of the conference call with visuals designed to guide participants through the call, will be available at 1:30 p.m. Pacific Time, May 9, 2012. Text of the conference call’s prepared remarks will be available within 24 hours of completion of the call. The webcast will include both the prepared remarks and the question-and-answer session. This information, along with GAAP reconciliation information, will be available on the Cisco Investor Relations website at http://investor.cisco.com.

About Cisco

Cisco (CSCO) is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

The earnings beat is nice for AOL. Not nice: Domestic display sales, a key metric, shrank 1 percent after climbing for several quarters. That’s going to be fresh meat for AOL critics like Starboard Value.

So what happened to domestic? “Domestic display advertising revenue declined primarily reflecting a decline in reserved impressions sold, partially offset by growth in reserved inventory pricing and Patch revenue,” AOL’s release says.

Later on in the release, we get a better sense of what may have happened: AOL’s audience is melting away. Traffic to AOL’s own properties is down 4 percent over the last year.

I imagine that Tim Armstrong will tell analysts that the decline isn’t wholly unexpected, because AOL’s dial-up unit, which still powers the whole operation, continues to shrink — that archaic business lost 14 percent of its subscribers in the last year.

On the other hand, this is a full year since AOL paid $315 million for the Huffington Post (and another $30+ million for TechCrunch, a few months before). I guess Armstrong could argue that things would be worse if he hadn’t bought the new sites, but that’s not very inspiring.

Update: A quick skim through the archives reminds me that shrinkage has been a recurring problem for AOL. The company also posted a 4 percent traffic drop in Q4 2011. And in Q3, traffic was flat. When I asked Armstrong about the issue then, he did indeed argue that the new sites were fighting off the decrease from dial-up users, and also argued that the company was still integrating Arianna and company (work in progress, apparently). He also predicted that traffic would tick up over time, and it has, just a bit — AOL is up to 108 million uniques versus 107 million six months ago. Key question: Does he expect more progress? Should shareholders?

AOL’s call starts at 8 am ET. We’ll see what Armstrong has to say then.

Update: AOL blames the Q1 drop on a number of things, including a specific but unnamed advertiser that stopped spending during the quarter. But Armstrong also tells analysts that his sales team’s pitch wasn’t resonating with advertisers. “A lot of it was because we have had a display strategy that was probably off-tune,” he says, adding “I was not happy with the domestic display.”

AOL says its display problems won’t be fixed this quarter, either, and predicts another drop. But it says domestic display will start moving up again in the second half of the year.

Meanwhile, AOL defends its much-maligned Patch unit, by noting that revenues are up and expenses are down at the local-news play this year. Armstrong tells investors that Patch will hit “run rate profitability” by the end of 2013. If they give him that much time.

Analysts surveyed by FactSet Research had forecast Demand Media to earn 5 cents a share on $80.5 million in revenue.

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But the company reported fewer than expected users for Star Wars: The Old Republic, which had 1.3 million subscribers at the end of the year, falling short of analysts’ expectations, who were estimating that the company would report roughly 1.6 million subscribers for the online game.

In response, the company’s stock was down more than 10 percent in after-hours trading at $13.60 a share. The drop is especially harsh given that the company’s stock has fallen 20 percent over the past few months.

As part of the financial release issued today, the company tried to paint a rosy picture of the company’s digital future.

In the fiscal year 2012, it generated $1.2 billion in digital revenues, exceeding its goal of $1 billion this year, and representing a 47 percent increase year over year.

In an interview, EA’s interim CFO Ken Barker said the company is forecasting digital revenues in fiscal 2013 of $1.7 billion, representing a growth rate of 40 percent. At those levels, he said digital will now comprise 40 percent of the company’s overall revenues, breaking away from its reliance on traditional packaged goods.

Barker noted that in the past six months alone, FIFA 12 was able to break $100 million in digital revenues, a first for one of its packaged goods titles.

The company said mobile revenues totaled $87 million in Q4, up from $70 million in the same period a year earlier. It also said the number of users who played a social game at least once in a given month was up, totaling 49 million in Q4, up from 36 million in the year-ago period.

For the fourth quarter, the company reported non-GAAP earnings per share of 17 cents on revenue of $977 million. Analysts were expecting EA to earn 16 cents a share on revenues of $960 million. EA’s own estimates were calling for a profit of 10 to 20 cents a share on revenues of $925 to $975 million.

When applying strict accounting rules, the company’s earned GAAP net income of $400 million, or $1.20 a share, on revenues of $1.4 billion. The same quarter a year earlier, the company recorded a profit of $151 million, or 45 cents a share, on revenues of $1.09 billion.

The first quarter, which has only one retail game but 11 digital games scheduled to launch, will be predictably softer. The company expects revenue of $950 million and profit of 40 to 48 cents a share.

Eventually they settle, and you, the pay-TV customer, ends up paying more.

And that’s what’s happening in the latest dustup between Dish Networks, the satellite TV service, and AMC Networks, the programmers now best known as the guys who bring you “Mad Men,” “The Walking Dead” and “Breaking Bad.”

The slight twist here: For argument’s sake, at least, Dish is saying that because AMC is selling digital versions of those shows to other outlets, its hit shows are worth less to Dish subscribers. “It’s actually devalued,” says Dish chairman Charlie Ergen.

The fact that networks are selling or giving away their stuff online has been a minor but growing issue in carriage fights for a while now. But this is the biggest stink that a cable/pay TV provider has made about it, at least in public.*

Dish first brought this up via a press statement last week, but Ergen went on about it at length today during the Dish earnings call.

It’s worth reading. I’ve cleaned up his comments just a bit for clarity (note that AMC Networks includes multiple channels, including AMC, IFC and Sundance):

We have very, very specific viewer measurement. Much more granular than somebody like Nielsen might have. So we’re able to watch our customer base and — we realize we skew a bit more rural — between [AMC Networks] programming, they have very, very low viewership, outside of a few obviously popular [shows] on AMC.

But those particular channels are also available to our customers on a variety of other sources, like iTunes, Amazon, Netflix and so on.

One of the things that programmers have done is that they’ve devalued their programming content by making it available in many multiple outlets. So, when someone asks for price increases …

We just look at it. Our customers are not really saying “We want to pay more money,” they’re saying, “We want more flexibility in our programming, and we don’t want to pay more.”

And when you look at that from a timing perspective, that’s just a contract that we can change. And we believe that the product is actually devalued. Not that there’s not some good programs, but that they’ve been devalued, because you can get it in multiple ways. And customers are asking for more flexibility, or have more flexibility to get the programming. So it’s not quite the same as something that was exclusive.

So we look at it and say, “This is a good opportunity to make a good business judgment call.” And obviously there’s a price where an [AMC Networks] product makes sense. We just don’t think that’s where we are today.

First things first: Obviously it makes the most sense to dump all of this into the “posturing” bucket, and treat it accordingly. The easy money here is to bet that, yet again, Dish and AMC will strike a deal, which Ergen, at the end of his remarks, explicitly says is on the table.

That said, a couple of points:

• Most of the big TV programmers seem to agree with Ergen’s point when it comes to free repeats of recent shows. Which is why they have been taking stuff that they’ve been giving away via outlets like Hulu, and either pulling them off the Web entirely, or requiring that customers “authenticate” — prove that they’re paying for cable or satellite TV —  in order to see them without delay. Note that Dish was the first pay-TV service to participate in the Fox authentication plan last summer. (Fox is owned by News Corp., as is this Web site.)
• TV programmers don’t seem to think that iTunes’ and Amazon’s a la carte sales of shows that aired the night before are devaluing their product. Because they’re still selling them, and by all accounts there doesn’t seem to be a ton of volume for those episodes. If there was, advertisers would squawk long before pay-TV providers would.
• The really touchy subject here is what happens to prior-season episodes of AMC hits like “Mad Men” and “Breaking Bad” on Netflix. Netflix has been arguing that these episodes are big draws for its customers, and that this is good for networks like AMC, because people discover the old shows on Netflix and then watch the new ones as they air. There is some evidence for this, too.
• But there is also evidence that Netflix repeats hurt some cable programming — like kids’ shows — too. And that leads to speculation that Viacom and Disney will pull back their shows from the service or raise prices when their contracts expire — even though Netflix is already paying big dollars for them. Netflix will have its hands on “Mad Men” and other AMC shows for at least a couple of years more. But it will be interesting to see what Dish’s complaint means for the renegotiations.

*There is also a wrinkle involving a lawsuit between Dish and a former AMC subsidiary, but that’s par for the course, too. All of these guys sue all of these guys, all the time. No recession, ever, for TV attorneys.

Since the company’s last earnings release in February, the videogame publisher’s stock has fallen 20 percent, and on Friday, it tumbled another 3.5 percent, or 55 cents, to trade at $15.12 a share.

In general, the market for game stocks are teeter-tottering, as the industry works through a massive transition from packaged goods sold at retail to digital games that are given away for free and distributed through Apple and Facebook.

Even pure plays like Zynga — which are focusing exclusively on mobile and social — aren’t immune, as investors question the free-to-play model and the dependence on third-party platforms. Zynga’s stock is off almost 20 percent since its IPO in December.

This afternoon, analysts are expecting EA to exceed the company’s internal guidance by earning 16 cents a share on revenues of $960 million. EA’s own estimates are calling for non-GAAP earnings of 10 to 20 cents a share on revenues of $925 to $975 million.

As a sign of the times, Wedbush analyst Michael Pachter revised his expectations down by $5 million due to U.K. games retailer Game Group going bankrupt during the quarter.

Otherwise, Pachter said that he’s expecting the company to report at the high end of the guidance, thanks to strong sales of Mass Effect 3, which went on sale during the quarter, and to a solid performance by the company’s online game, Star Wars: The Old Republic.

Other console titles shipped during the quarter include FIFA Street and Tiger Woods PGA Tour 13.

The Washington Post reported this morning that its online ad revenue dropped 7 percent in the first three months of 2012. That follows a New York Times earnings release which saw that publisher’s Web ad business drop 2 percent.

(We should get some color on the Wall Street Journal and Dow Jones, when parent company News Corp. reports its earnings next week; News Corp. also owns this Web site.)

The Times said that digital sales were “under pressure” in the first quarter of the year, while the Post didn’t bother to add any color to its results. But it did note that online display ads were down 11 percent, while classifieds were down 1 percent.

Unlike the Times, the Post is essentially a regional newspaper, so it is harder to argue that its travails reflect a larger trend. And it’s also worth noting that the Post faces fierce competition for its core political coverage from Politico, an online/offline competitor that basically sprouted overnight.

But for the record: The rest of the Web publishing business — including not only Google but laggards like Yahoo — has been posting Q1 revenue increases.  [An earlier version of this post incorrectly reported that AOL's ad revenues were up for Q1; the company won't post its numbers until next week.]

For the year, Yelp projected revenue of $128 million to $132 million, well above recent estimates of analysts polled by Thomson Reuters for $124 million.

For the current quarter, the company forecast revenue of $29 million to $31 million, while analysts expected revenue of $29 million.

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