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Cisco on Rebound as Q2 Results Beat Street

After a few tough quarters, a solid beat.

Asa Mathat

Shares of networking equipment giant Cisco Systems are rising after the company reported second-quarter earnings that were better than analysts expected.

Cisco reported a per-share profit of 53 cents, up on revenue of $11.94 billion. Analysts surveyed by Thomson Financial had called for Cisco to report earnings per share of 51 cents on revenue of $11.8 billion. Revenue rose 7 percent, and net income rose 9 percent.

Cisco shares rose by more than 5 percent in after-hours trading on the Nasdaq exchange to $28.32. The shares fell by more than 2 percent during the regular trading session to close at $26.91.

Cisco also raised its quarterly dividend payment to 21 cents a share from 19 cents.

“We delivered this strong performance despite a volatile economic environment,” Cisco CEO John Chambers said in a statement.

On a conference call, Chambers said Cisco expects Q3 earnings per share in the range of 51 to 53 cents on about $12 billion in sales, which is in line with what analysts had expected.

Sales in Cisco’s switching business, its biggest product segment, rose 11 percent year-on-year. Sales of routing equipment grew 2 percent. Wireless products grew 18 percent. Sales of data center products rose 40 percent, led by Cisco’s Unified Computing System, which it said is on track to post $3 billion in revenue this year.

Yet some segments remained under pressure. Service provider video, Cisco’s business of selling video hardware and software to cable providers, continued to decline, falling 19 percent year-on-year.

Across geographic regions, Cisco showed the most growth in the Americas region, which rose 8 percent. Sales in Latin American countries rose 12 percent. The bad spot was Asia, where revenue fell 6 percent.

Sales to enterprises, Cisco’s term for corporate customers, rose 10 percent, followed by sales to government customers, which grew 7 percent. Sales to cable and Internet service providers fell 1 percent.

Chambers sounded upbeat on a conference call with analysts. After several challenging quarters, he set a positive tone but dodged a question about his pending retirement as CEO. “I feel pumped up,” he said.

So as part of the ongoing running gag between Chambers and me that dates back now almost four years, this is the part of the story where I pick a song that characterizes Cisco’s quarter. Chambers sounded pretty enthusiastic, more so than in any quarter in recent memory. He talked about setting a personal record on a four-mile run today and lifting weights in the gym. So today I pick the Aerosmith classic “Back in the Saddle,” and imagine Chambers doing his best impersonation of a 1970-vintage Steven Tyler. Enjoy.

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