Cisco Falls After Hours as Q1 Sales Come Up Short, Despite an Earnings Beat

Cisco Systems just reported its quarterly earnings and, as expected, they’re a little light.

Earnings per share for the quarter were 53 cents on revenue of $12.1 billion. The bottom line is better than anticipated, but sales are about $300 million shy of what analysts had expected. The consensus view called for Cisco to report 51 cents per share in earnings on revenue of $12.4 billion.

The company also said it would boost its share buyback program by a whopping $15 billion.

Cisco shares fell by more than two percent after hours.

The company hasn’t yet given guidance on the quarter ending in January. That will come in a conference call set to begin shortly.

Here’s Cisco’s original announcement:

Cisco Reports First Quarter Earnings
Announces $15 Billion Increase in Stock Repurchase Program

SAN JOSE, CA–(Marketwired – Nov 13, 2013) – Cisco (NASDAQ: CSCO)

Q1 Revenue: $12.1 billion (increase of 2% year over year)
Q1 Earnings per Share: $0.37 GAAP; $0.53 non-GAAP

Cisco (NASDAQ: CSCO), the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its first quarter results for the period ended October 26, 2013. Cisco reported first quarter revenue of $12.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.0 billion or $0.37 per share, and non-GAAP net income of $2.9 billion or $0.53 per share.

“This quarter we delivered record non-GAAP profitability and continued our steady stream of innovation and market leadership,” stated Cisco Chairman and CEO John Chambers. “While our revenue growth was below our expectation, our financials are strong, our strategy is strong and our innovation engine is executing extremely well. We remain confident in our long-term goal to be the #1 IT company in the world and help our customers solve their biggest business problems.”

GAAP net income for the first quarter of fiscal 2014 included pre-tax charges of $237 million related to the workforce reduction plan announced in August 2013, and a pre-tax charge of $257 million related to compensation expense in connection with Cisco’s acquisition of the remaining interest in Insieme Networks, Inc. (“Insieme”). These charges were excluded from non-GAAP net income and earnings per share.

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

Cisco will discuss first quarter results and business outlook on 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.

Stock Repurchase Program Expanded

Cisco is also announcing that its board of directors authorized up to $15 billion in additional repurchases of its common stock. Cisco’s board had previously authorized up to $82 billion in stock repurchases. There is no fixed termination date for the repurchase program. The remaining authorized amount for stock repurchases under this program, including the additional authorization, is approximately $16.1 billion.

Other Financial Highlights

Cash flows from operations were $2.6 billion for the first quarter of fiscal 2014, compared with $4.0 billion for the fourth quarter of fiscal 2013, and compared with $2.5 billion for the first quarter of fiscal 2013.

Cash and cash equivalents and investments were $48.2 billion at the end of the first quarter of fiscal 2014, compared with $50.6 billion at the end of the fourth quarter of fiscal 2013.
During the first quarter of fiscal 2014, Cisco paid a cash dividend of $0.17 per common share, or $914 million.

Cisco repurchased approximately 84 million shares of common stock under the stock repurchase program at an average price of $23.65 per share for an aggregate purchase price of $2.0 billion during the first quarter of fiscal 2014.

“We delivered solid profitability in the quarter and are focused on capitalizing on our strategic opportunities,” stated Frank Calderoni, Cisco executive vice president and chief financial officer. “We are committed to our capital allocation strategy as we demonstrated today with the $15 billion increase in the authorization of our stock repurchase program.”

Select Global Business Highlights

Cisco completed its acquisition of Sourcefire, Inc., a leader in intelligent cybersecurity solutions, effectively making Cisco a provider of one of the industry’s most comprehensive advanced threat protection portfolios, as well as a broad set of enforcement and remediation options that are integrated, pervasive, continuous and open.

Cisco completed its acquisition of privately-held Composite Software, Inc. to expand its portfolio of Smart Services and extend its next-generation services platform by connecting data and infrastructure.
Cisco announced its intent to acquire WhipTail Technologies, Inc., a leader in high performance, scalable, solid-state memory systems designed to enable organizations to simplify data center and virtualized environments and process more data in less time.

Cisco opened a Center of Innovation in Rio de Janeiro, Brazil to develop technology solutions specifically tailored to local needs in the country.
Cisco Innovation

Cisco unveiled nPower, the world’s most advanced network processor, which is uniquely designed to power the Internet of Everything.

Cisco introduced its Network Convergence System (NCS), a network fabric family designed to serve as the foundation of a massively scalable, smarter and more adaptable Internet to power the Internet of Everything.

At its annual Collaboration Summit, Cisco announced the next phase of its vision for collaboration, which focuses on delivering innovations that embrace the modern workspace and enable users to work smarter and more efficiently from virtually anywhere.

At the Meeting of the Minds conference in Toronto, Cisco released Smart+Connected™ City Wi-Fi, an integrated solution geared toward helping global cities provide citywide connectivity and to establish a platform where the Internet of Things (IoT) can be fully utilized to develop new services for citizens.
Select Customer Announcements

Cisco and NetApp broadened the FlexPod® portfolio with new validated designs across the entire portfolio, highlighted by the introduction of FlexPod Select for dedicated data-intensive workloads.

Cisco announced that Shenandoah Telecommunications Company, a leading regional U.S. telecommunications service provider, has updated its dense wavelength division multiplexing (DWDM) fiber-optic network with Cisco’s Coherent DWDM technology to support 100 Gbps speeds to its subscribers throughout Virginia, West Virginia and Maryland.

Cisco announced that its Videoscape™ Distribution Suite supported the introduction of Deutsche Telekom’s recently launched TV Everywhere service “Entertain to go.”

Cisco announced that AirFasTickets, a fast-growing international online travel agency, has deployed the Cisco® Business Edition 6000 to deliver complete collaboration capabilities from a single, centrally managed platform.
Cisco announced a collaboration with Facebook, Cisco Connected Mobile Experience (CMX), that helps businesses increase brand recognition and proactively target promotions and advertisements based on customer preferences and demographics using Wi-Fi.
Cisco announced that DKSH Malaysia, a leading Market Expansion Services provider in the country, has implemented Cisco Unified Contact Center Express solutions to enhance the customer service experiences for their Business Unit Healthcare.

Cisco announced that Belgacom, a leading telecommunications service provider, selected the Cisco Aggregated Services Router (ASR) 5000 to enable the evolution of its network and provide subscribers with superior mobile Internet experiences.

Cisco announced that Grupo Experiencias Xcaret deployed Cisco Unified Communications, Cisco Customer Collaboration (Contact Center), business video, and wireless solutions in the three natural parks that it manages in the Mayan Riviera and their central offices in Cancun.

Cisco and the University of Alberta announced the establishment of a Cisco Research Chair in Healthcare
Solutions which will focus on how advanced technologies and strategies can support health care.