Cisco jumps 6% on signs of comeback

@CNNMoneyTech November 10, 2011: 2:59 PM ET

NEW YORK (CNNMoney) -- After a year filled with turmoil, Cisco appears to be on its way back.

The networking giant continued to find ways to grow its sales in its latest quarter despite belt-tightening from some of the company's core customers. Cisco's restructuring plan has nearly wrapped up, and the company is reaping the rewards: Its video and collaboration divisions -- both multi-billion dollar businesses, grew by more than 12% in the quarter that ended Oct. 31, making up for its flatlining switching and routing units.

The stellar growth in non-core businesses wasn't enough to grow profits from last year, however. The company posted its fourth-straight quarter of declining earnings, and margins continued to tighten.

Still, investors cheered the news that the worst appears to be behind Cisco, and shares of Cisco (CSCO, Fortune 500) rose 6% Thursday.

"Our strategy and vision outlined in our 3 year plan is taking hold and off to a very good startsaid John Chambers, Cisco's CEO, said Wednesday on a conference call with analysts. "We have organized Cisco to successfully execute against our strategy of providing intelligent networks, architectures and integrated products that solve customers' business problems."

As part of its new focus on business-crucial technologies, Cisco has made headway into the lucrative video conferencing business. Its high-definition telepresence unit is on pace to bring in $1.4 billion this year.

Yet holding Cisco back had been its exposure to the belt-tightening public sector. It controls 70% of the public-sector routing and 80% of the public switching market, sales of which come from government customers and schools.

There was some relief this quarter when Cisco announced U.S. public sector business grew 5%. Growth came primarily from defense agencies and state governments, while civilian-focused agencies and secondary schools cut back on their Cisco purchases during the quarter.

Though customers are buying more networking tools, they're buying cheaper ones. For instance, switching orders rose 10% this past quarter, but revenue was unchanged from a year ago.

The company's path to sustained growth will undoubtedly be choppy, but the company believes its restructured business will help it weather the storm.

By the numbers

The San Jose, Calif.-based company said its net income fell to $1.8 billion in its fiscal first quarter, down 8% from a year earlier. Results included one-time charges totaling $500 million due to the company's now mostly completed restructuring initiatives.

Without the charges, Cisco earned 43 cents per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, forecasted earnings of 39 cents per share.

Cisco announced plans to cut 9% of its workforce in July, and the related costs cut into earnings growth. But Chambers said that the company "continues to make major progress in its comprehensive action plan to achieve profitability growth" in the coming year. Most analysts expect double-digit earnings growth this quarter.

Sales rose 4.7% to $11.3 billion, topping analysts' forecasts of $11 billion.

Chambers said he expected sales to grow by 7% or 8% during the current quarter, which was slightly higher than the 7% anticipated by analysts. To top of page

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