Cisco's Q4 beats Street view, focus on outlook

Markets Reuters

By Noel Randewich

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SAN FRANCISCO (Reuters) - Cisco Systems Inc's quarterly results edged past Wall Street's scaled-back expectations as IT spending held up despite fears of a severe pullback, buoying its shares in extended trading.

The world's largest networking equipment maker reported sales of $11.2 billion in the fiscal fourth quarter, surpassing expectations for under $11 billion. Net income beat estimates as the industry bellwether -- which is trying to rekindle growth after overspending on a spate of non-core businesses -- cut costs.

Investors will now want to hear Chief Executive John Chambers' outlook for the current quarter and his views on how an increasingly gloomy economic picture will impact the networking industry.

"They beat a low bar. A lot of it is coming from cost cutting, which we anticipated. In that sense it's a relief," said Joanna Makris of Mizuho Securities USA.

Cisco, which depends on government spending for about a fifth of its revenue, said in July it would cut 15 percent of its workforce and sell a set-top box factory in Mexico as part of an effort to slash annual expenses by $1 billion.

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It has warned since last year that government spending cuts would include network equipment, and that a deal last week to reduce the U.S. federal budget deficit could hurt the San Jose, California company's business more.

Investor sentiment also worsened after rivals Juniper Networks Inc and Brocade Communications Systems Inc slashed outlooks in recent weeks as the economic picture darkened, slamming their shares.

Analysts on average had expected fourth-quarter revenue of $10.969 billion from Cisco, according to Thomson Reuters I/B/E/S.

Net income rose slid 36.3 percent to $1.2 billion or 22 cents a share, from $1.9 billion or 33 cents a share a year earlier. Excluding certain items, it earned 40 cents share, just above the 38 cents expected on average.

Shares of Cisco rose to $14 in extended trade after closing down 2.3 percent on Nasdaq.

"The real issue is, does he (Chambers) give a chilling outlook or is it just a conservative outlook? Have things grinded to a halt, or is the enterprise still spending?" asked Colin Gillis, BGC Partners analyst.

(Additional reporting by Alexei Oreskovic; Editing by Richard Chang)

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