Earnings Preview: Cisco to report 1Q earnings

Associated Press

NEW YORK (AP) — Cisco Systems Inc. is set to report results after the market close Tuesday for its latest quarter, one that's expected to reflect the effects of continued economic turmoil in Europe and a slowdown in China.

WHAT TO WATCH FOR: Cisco, the world's largest maker of computer networking equipment, started warning in April that global economic conditions were putting the brakes on its growth again. Its stock still hasn't recovered from the ensuing sell-off.

The latest quarter, which ended in October, is expected to be one of slow growth as well. Excluding the effect of buying the digital video technology company NDS Group Inc. just before the start of the quarter, Cisco's revenue is expected to have grown just 3 percent from a year ago. That's well below Cisco's goal of growing revenue 5 percent to 7 percent per year.

As a maker of big-ticket capital equipment with an international reach, Cisco is sensitive to spending trends among businesses and governments. Given the continuing problems in southern Europe and the looming "fiscal cliff" in the U.S., analysts don't expect a quick pickup in the quarter that just started. They'll nevertheless be listening keenly to the usually wide-ranging post-report commentary from Cisco CEO John Chambers.

WHY IT MATTERS: Cisco, which is based in San Jose, Calif., is one of the largest technology companies. Its wide reach and sensitivity to business and government investment cycles make it something of an economic bellwether. It's a component of the Dow Jones industrial average.

WHAT'S EXPECTED: Analysts polled by FactSet expect Cisco to report earnings of 46 cents per share, excluding items and the cost of stock-based compensation. That's at the midpoint of the company's own guidance of 45 cents to 47 cents.

Analysts expect revenue of $11.79 billion, above the midpoint of the company's own estimate of $11.5 billion to $11.9 billion. That includes about $200 million in revenue from NDS.

Cisco usually provides an outlook for the new quarter. Analysts are expecting earnings of 48 cents per share on $12.1 billion in revenue.

LAST YEAR'S QUARTER: Cisco reported net income of $1.8 billion, or 33 cents per share, on revenue of $11.3 billion. Its adjusted earnings amounted to 43 cents a share.