Earnings Preview: Cisco to report for fiscal 4Q

0
17

NEW YORK (AP) ? Cisco Systems Inc., the world’s largest maker of computer networking equipment, is undergoing severe belt-tightening as it reports its fiscal fourth-quarter results after the stock market closes Wednesday.

WHAT TO WATCH FOR: Cisco announced three weeks ago that it would cut 6,500 jobs, or about 9 percent of its work force, in a drastic move to address slowing growth. Encouraged by two decades of success, the company was trying to expand into too many different markets, and it’s now slimming down to focus on its core products.

Analysts will be listening for more details on the restructuring, which will cost $1.3 billion in severance and termination benefits. Cisco will take a $750 million charge in the just-ended quarter.

“While the stock is cheap, it’s very early days in the company’s restructuring efforts ? the company hasn’t yet addressed much the restructuring that’s necessary in our view,” Jefferies analyst George Notter wrote in a research note Monday.

Notter expects decent sales to corporate clients in the quarter, but weak ones to government.

Cisco still has a stated goal of 12 percent to 17 percent growth in annual revenue. On the most recent financial conference call, CEO John Chambers said the figures were “not reflective of the environment,” but he hasn’t provided a new range. The company is holding an analyst day next month, which should provide more clarity.

WHY IT MATTERS: Cisco is one of the largest technology companies. Its stock is close to the two-year low of $13.94.

WHAT’S EXPECTED: Analysts polled by FactSet expect Cisco to report earnings of 38 cents per share on revenue of $11 billion. The company provided an outlook that pointed to revenue of $10.84 billion to $11.05 billion.

For the current quarter, analysts are expecting earnings of 39 cents per share on $11 billion in revenue.

LAST YEAR’S QUARTER: Cisco reported net income of 33 cents per share on revenue of $10.8 billion.