NEW YORK—Cisco Systems Inc. reports earnings for the fiscal third quarter on Tuesday. The following is a summary of key developments and analyst opinion related to the period.
OVERVIEW: Cisco is the world's largest maker of computer networking equipment. Last November's comments by Chief Executive John Chambers triggered a sell-off in the company's shares amid worries that the economic slowdown is hurting the tech bellwether's sales.
The decline continued in February, after Cisco's second-quarter report signaled an ongoing slowdown. The company had forecast a 10 percent revenue growth for the third quarter, below Wall Street's expectations of 15 percent growth. At the time, Cisco's management acknowledged that many U.S. corporations are being cautious about spending, but they also predicted that growth will soon pick up, helped by surging demand in emerging markets.
Also in February, CFO Dennis Powell retired after more than 11 yeas with the company. Senior Vice President Frank A. Calderoni was named his successor
BY THE NUMBERS: Analysts, on average, are expecting a profit of 36 cents per share on sales of $9.75 billion, according to a poll by Thomson Financial.
ANALYST TAKE: Mark McKechnie of American Technology Research expects Cisco to "likely to meet or slightly beat low guidance set in February." The analyst, who rates the company "Buy," thinks orders hit a bottom early in the year and picked up slightly in March and April.
Thomas Weisel Partners analyst Jason Ader expects Cisco to meet his estimates for adjusted earnings of 37 cents per share on sales of $9.74 billion, helped by strong demand overseas. Ader, who rates the company "Overweight," thinks Cisco's guidance of a 10 percent sales growth "appropriately accounted for ongoing domestic weakness." Cisco's cost controls and expected hefty share buyback activity, he added, should "cushion" earnings per share.
"While some of the overseas strength is clearly due to the weak dollar, which may not be sustainable near term, it also clear that IT (information technology) budget tightening in the U.S. has yet to materially spread to other geographies -- which bodes well for geographically-diversified Cisco," he wrote.
WHAT'S AHEAD: Ader said Cisco's fourth-quarter guidance will likely be in line with or slightly below Wall Street's expectations. He expects earnings of 39 cents per share, matching average analyst estimates.
"We believe the most important metrics to watch in the April quarter report will be order growth for the commercial segment, domestic and international order trends and core infrastructure order growth," he wrote.
STOCK PERFORMANCE: Shares of San Jose, Calif.-based Cisco rose 4.7 percent during the quarter to close at $25.64 at the end of April. The stock has inched higher since.
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