Cisco’s 4Q earnings rise 56 per cent, raises dividend

[1]

Cisco Systems Inc., the world's largest maker of computer networking equipment, is seeing its ambitions cramped by the global economic turmoil, but results for its latest quarter were strong enough that it announced an increase to its dividend.

Cisco's sales in the latest quarter rose just 4.4 percent, as customers in Southern Europe were in the grips of a recession and government customers on both sides of the Atlantic held back.

The results beat Wall Street's muted expectations, and Cisco raised its dividend by 75 per cent. The new quarterly dividend of 14 cents per share represents an annual yield of 3.2 per cent of Cisco's stock price, a relatively high yield for a technology company. Cisco only started paying a dividend in April 2011.

The higher dividend doesn't necessarily mean Cisco will give shareholders more cash overall, as it has a buyback program as well and could reduce the pace of buybacks to free up cash for the dividend.

Cisco said it's committing to returning to shareholders at least 50 per cent of its free cash flow, or the cash it pulls in after expenses and capital investment. In the fiscal year that just ended, it returned $5.9 billion to shareholders in buybacks and dividend, which was already more than 50 percent of free cash flow.

Cisco said it earned $1.9 billion, or 36 cents per share, in its fiscal fourth quarter, which spanned May to July. That compares with income of $1.2 billion, or 22 cents per share, in the same period a year ago.

Excluding the cost of stock-based compensation, restructuring costs and other items, Cisco said it would have earned 47 cents per share, up from 40 cents per share earned last year.

On that basis, Cisco's earnings were 2 cents above the average analyst estimate, as polled by FactSet.

Revenue rose was $11.7 billion, beating estimates. The 4.4 per cent growth rate is below Cisco's long-term goal of 5 per cent to 7 per cent growth.

Shares of the San Jose, Calif., company rose 77 cents, or 4.3 per cent, to $18.11 in extended trading, after the release of the results.

That's the highest level for the shares since May, when Cisco warned that economic weakness in Europe would hold it back.

Chief Financial Officer Frank Calderone said Cisco expects to earn 45 cents to 47 cents per share in the quarter that just started. That brackets the average analyst forecast, at 46 cents.

Cisco said it expects revenue of $11.5 billion to $11.9 billion in the new quarter, with the high end of the range achievable when including sales from NDS, a video-equipment company Cisco just bought.

Analysts were expecting $11.7 billion in revenue, but not all of them are including the effect of the NDS acquisition in their estimates.

The acquisition will not affect earnings in the current quarter, Cisco said.