Cisco up 12.6% for the day

Network equipment maker Cisco Systems Inc posted a higher than expected quarterly profit and said current-quarter revenue could increase, according to an article by Reuters.

The article states that Cisco Chief Executive, John Chambers, said the company was seeing some good signs in the United States and that other parts of the world are “encouraging.”

“We are managing the business to account for a continued slow steady recovery on a global basis,” Chambers said.

According to the article, Cisco forecast current-quarter earnings per share of 50 to 52 cents, excluding unusual items, in line with Wall Street expectations. It said revenue would grow in a range of 4 to 7 percent from the year-ago quarter.

This implies revenue of about $12.16 billion to $12.5 billion, compared with analysts’ expectations for $12.47 billion according to Thomson Reuters I/B/E/S.

Profit for the fiscal third quarter grew to $2.5 billion, or 46 cents per share, from $2.17 billion, or 40 cents per share, compared to the same quarter last year.

Cisco forecast fourth-quarter gross margins of 61 to 62 percent, matching the prior quarter’s estimate.

Cisco shares rose to $23.88 in extended trading, up 12.6% for the day.

In April we (UGC) reported that, with a market cap of $110 billion and with $46 billion in net cash (cash on hand minus debt) on its balance sheet,  Cisco was super cheap, putting it on a price to earnings ratio adjusting for cash of just 6x earnings, versus an average market P/E of ~16x.

Cisco has long been a recommended investment for clients of UGC and we would not be surprised to see this recent earnings report as the start of further positive news flow for this world dominator over the medium term.

At UGC we have been banging the table on technology for a long time. Today we believe that we are in the initial stages of what is likely to be a technology super-cycle as now mature, financially stable and cheap cash generating tech companies continue to build on the foundations laid pre the tech boom years of the late 1990’s.

If you would like to learn how you can position yourself to benefit, contact a UGC financial strategist today by calling 03 8657 7640 or email info@ugc.net.au .

The information contained in this report is General in nature and has been prepared without taking into account your objectives, financial situation and needs.