Cisco's Dividend, Buyback Increase
11 February 2016 - 7:03PM
Dow Jones News
(FROM THE WALL STREET JOURNAL 2/11/16)
By Don Clark
Cisco Systems Inc. posted a 31% jump in quarterly net profit on
Wednesday, but showed signs that weakening economic conditions have
taken a toll on the businesses that the networking equipment giant
serves.
The San Jose, Calif.-based company, whose results are closely
watched as an indicator of corporate technology demand, also
boosted its quarterly dividend and stock-buyback plan, and
projected stronger revenue for the current quarter than some
analysts had expected.
Its shares, off 17% since the beginning of 2016, rose 7% in
after-hours trading following the news.
Cisco's numbers for the period ended in January showed both
positive and negative signs, which the company attributed partly to
steady buying by telecom services and caution among other corporate
customers.
For example, the company said revenue grew 5% in a routing
equipment segment that had been shrinking lately, a category of
hardware largely purchased by communications carriers. Video
equipment purchased by carriers rose 37%.
But sales of switching gear -- Cisco's largest single business
-- declined 4%, reversing a recent pattern. Revenue for Cisco's
data center group, led by sales of server systems, declined 3%
after growing 24% in the period ending in October.
Chuck Robbins, Cisco's chief executive, said the company began
hearing signs of caution among some corporate customers in January,
toward the end of the quarter. In response to developments such as
declining stock prices, he said, companies began holding up orders
on nonessential purchases such as some types of the switching
systems used on corporate campuses.
On the other hand, Cisco seems to have gotten past a long-term
slide in its business in China.
Cisco has faced an industrywide shift of some networking
functions to software from the hardware that has been its
specialty. Mr. Robbins and predecessor John Chambers, who gave up
the CEO job last summer, have responded by trying to build new
software and services that can generate recurring revenues.
To underscore Cisco's belief that it can weather the current
turbulence, the company on Wednesday raised its quarterly dividend
by 24% and increased its stock-buyback plan by $15 billion.
In all, Cisco reported that net profit for the period ended Jan.
23 rose to $3.15 billion, or 62 cents a share, up from $2.4
billion, or 46 cents a share.
Total revenue slipped slightly to $11.93 billion from $11.94
billion a year ago.
(END) Dow Jones Newswires
February 11, 2016 02:48 ET (07:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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