A Resurgent Cisco Blows Some Storm Clouds Away

Networking equipment giant Cisco Systems (NASDAQ:CSCO, news, filings) had a very solid fiscal second quarter, beating earnings estimates and projecting faster growth than expected next quarter. Starting in January, bad news from the likes of Juniper, Acme Packet, and Tellabs suggested the equipment space was in for a rough patch. However, it now appears that we’re just looking at market share shifting around rather than any sector-wide trend.

Cisco’s revenues of $11.52B slightly exceeded consensus estimates, while adjusted earnings per share of $0.47 bested the expected $0.43. Guidance for next quarter of 5-7% growth was slightly higher than anticipated, suggesting that the company is finding the competitive footing plenty comfortable enough. They even added a couple of pennies to their quarterly dividend and said that its interest in M&A has been restored.

Last year was a rebuilding year for Cisco, following its stumbles after a long acquisition binge. They exited many lines of business and went through some layoffs, but it does seem to have worked. And when a company of Cisco’s size moves from defense to offense, it can have a substantial effect on buying patterns in the sector.

So it’s now officially time to stop talking about how the equipment sector is reeling, and instead talk about who is feeling the yin and who is feeling the yang this winter. Carrier spending is definitely shifting around, but as a whole it is probably quite healthy.

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Categories: Financials · Telecom Equipment