Cisco shares double 6% on revenue spoon, revenue decline; CFO to retire

Cisco Systems Inc. reported financial results that were largely in line with the Wall Street estimate, but another revenue decline and accompanying soft income battled the stock in trading after hours Wednesday.

The company also announced the retirement of longtime Chief Financial Officer Kelly Kramer, once a successor is found.

The maker of network services, video conferencing tools and security software reported fourth-quarter net income of $ 2.64 billion, or 62 cents a share, as revenue rose 9% to $ 12.15 billion from $ 13.4 billion in the year-ago period. After adjusting for stock compensation and other securities, Cisco reported earnings of 80 cents a share, down from 83 cents a share a year ago.

Analysts surveyed by FactSet had adjusted revenues of 65 cents a share of revenue averaging $ 12.09 billion, although those expectations have dropped significantly since COVID-19 began to spread around the world. Analysts expect adjusted revenue of 75 cents a share on sale of $ 13.14 billion at the end of 2019.

First-quarter adjusted gains of 69 cents to 71 cents fell short of the 75 cents modeled by FactSet analysts. Cisco also warned that revenue from Q1 will decline 9% to 11% year-over-year. This prompted Evercore ISI analyst Amit Daryanani to immediately comment that weak guidance will be his focus during a conference interview with analysts.

The fourth quarter results, announced after the market’s close Wednesday, first sent Cisco CSCO,
+ 1.92%
shares more than 6% down in trading after hours. Cisco stock is flat in 2020, while the S&P 500 index SPX,
+ 1.40%
has risen 4.6%. However, since March 12, shares of Cisco have jumped 45%.

“By the end of fiscal 2020, we have achieved our goal of more than half of our revenue from software and services, and this strategy will continue to resonate with customers as they digitize their organizations,” said Cisco Chief Executive Chuck Robbins in a statement. t announced the results. “As we focus on the future, we balance our R & D investments to focus on new areas so that we can continue to offer the best, most relevant technology in simpler, easier-to-consume ways.”

Cisco said it would undergo a $ 1 billion cost reduction in the next few quarters by rebalancing “its R&D investments” in various areas that include cloud security and enterprise automation, leading to speculation of job cuts by Patrick Moorhead, chief analyst at Moorish Insights and Strategy.

The company in San Jose, California, benefits and suffers in the age of coronavirus: Hardware sales are booming during the health and economic crisis, while the demand for Cisco tools and services like Cisco Webex that help remotely has increased.

Cisco finds itself in a dire situation during the pandemic: It is dominant over network equipment markets, but has to deal with pressure from unpredictable service providers and business outlets; COVID-19 and the work-from-home movement has put pressure on high-margin product groups on campus; and the recent entry of Arista Networks Inc. OTHER,
and Juniper Networks Inc. JNPR,
in campus switching and WLAN threats.

“We are aware that in the medium to medium term, Cisco’s topline will be challenged by macro wind, but diversification, opex [operating expense] Discipline and cash flow flexibility allow it to show greater resistance on the revenue line, ”said Morgan Stanley analyst Meta Marshall, in a July 9 note that upgraded Cisco shares to overweight and maintained a $ 54 price target.