The maker of network equipment, Cisco Systems (CSCO, Financial), reported its third quarter top and bottom line numbers for the fiscal year 2015 on May 13 after the bell, leaving the Street analysts impressed as the revenue and earnings seems to have bounced back. The San Jose, California-based company has already experienced a string of lackluster quarters in 2014 and in the recent quarter the growth in sales was aided by a turnaround in the sales of the switching systems, which is the largest business contributor to its overall revenue earned in the quarter. Let’s take a look at the major highlights of the third quarter of Cisco.
The fabulous number mix
Sales in units rose 6% during the third quarter of the fiscal year. Revenue from the routing equipment business line also improved 4% year-over-year in the quarter.
But though these two segments exhibited growth in sales for Cisco, the revenue from the so-called video segment showed decline of an additional 5% during the quarter after facing stiff competition from fellow rivals such as Arris Group (ARRS, Financial) and Casa Systems Inc.
Overall, revenue in the quarter jumped to $12.14 billion from $11.55 billion reported a year ago. In fact, the earned revenue surpassed the Thomson Reuters analyst forecast of $12.07 billion for the quarter.
Net income on GAAP basis improved to $2.44 billion, or $0.47 a share, from $2.18 billion, or $0.42 a share, reported in the year ago quarter. On a non-GAAP basis, earnings improved 6% year-over-year to $0.54 per diluted share. The earnings (on non-GAAP basis) were able to beat the analyst forecast of $0.53 per share for the quarter. The earnings reflected the solid performance of the company in the presence of intense competition in most of its operative segments.
John Chambers, CEO of Cisco, commented – “Cisco is in a very strong position and we delivered another solid quarter. Our vision and strategy are working and we are executing very well in a tough environment, as evidenced in our revenue growth, profitability, strong gross margins and cash generation. Our customers feel the pace of change and disruption in every industry and market, and know their success depends on digitizing their business…”
Cash generation remains solid
In the third quarter, the cash generated from operations stood at $3 billion, up from $2.9 billion generated in the second quarter of the 2015 fiscal year. In fact, it is interesting to note that the company paid a cash dividend of $0.21 a share, or to the tune of $1.1 billion, during the quarter.
Ciscco’s CFO, Kelly Kramer, stated during the earnings call – “We saw good balance again across our portfolio and delivered revenues of $12.1 billion up 5%, and grew earnings per share faster than revenue. We continued our strong cash generation and returned another $2.1 billion to our shareholders. We're well positioned in the market, managing the company well, and focused on delivering value for our customers and shareholders. It's an exciting time…”
Final word
The worldwide famous networking giant’s third quarter is showing signs of brisk growth in both its top and bottom line, though rivals are implementing fiercer options to compete with Cisco all the while. The growth in earnings has been like a milestone achieved by Cisco in this fiscal year. Let’s stay tuned and keep an eye on how the networking honcho performs as it enters into the final quarter of the 2015 fiscal year that ends in July of the year.
