Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
Cisco's Great Expectations by Tiernan Ray
Summary: On Tuesday Cisco Systems (NASDAQ:CSCO) said its FQ4 sales were $9.4 billion, handily beating analyst estimates of $9.27 billion. During the company's conference call (full transcript), CEO John Chambers told investors he was raising Cisco's growth forecasts from 10-15% to 12-17%. In a subsequent Barron's interview, Chamber's was undisturbed by the global credit crisis that has so spooked the markets. He says it won't stop companies from investing in network infrastructure or new technologies like Cisco's TelePresence videoconferencing. In fact, he says, the global economy is the strongest he's ever seen it. Previous acquisitions such as its 2006 $7 billion acquisition of Scientific America and its TV set-top boxes are producing better-than-expected growth, and analysts expect similar success in integrating its most recent purchases of online collaborative-software designer WebEx and messaging infrastructure company IronPort. Other salient factors include whether Cisco can increase operating margins through price cutting. One analyst says he's surprised by Cisco's lack of aggressiveness in using its $22 billion in cash to buy back shares, leading him to speculate a major acquisition may be in the making. Chambers says he thinks buyout opportunities still exist. CEO Chambers says the company's present situation reminds him of Cisco more than a decade ago: "We were a routing company [back in the early 1990s], and we bought switches, and we had to learn about that. Now, we are a networking company that is expanding dramatically and rapidly into collaboration."