Cisco’s 4Q Results: Major Tech Bellwether Beats Estimates; Could Influence HP, Dell, Oracle

Cisco Systems Inc. (Nasdaq: CSCO), the No. 1 provider of Internet gear, reported fourth-quarter results Wednesday that beat analyst estimates by a penny and were much better than last year's, when CEO John Chambers said the company was overmanned and was in the midst of layoffs and retrenchment.

The San Jose, Calif., company reported net income of to report net income of $1.92 billion, or 36 cents a share, compared with only $1.23 billion, or 22 cents a share, in 4Q 2011. Operating earnings were 47 cents a share, apenny ahead of estimates of analysts surveyed by Thomson Reuters.

Cisco shares leaped 6 percent after the earnings report.

Fourth-quarter revenue for the period ended July 328 rose about 4 percent to $11.7 billion.

Cisco is among a handful of technology giants whose reports are out of sync with most other companies, so they represent a bellwether of where the industry is headed for the rest of the year. Agilent Technologies Inc., (NYSE: A), the electronic instrument maker that was the original Hewlett-Packard Co. (NYSE: HPQ) before it was spun off, also reported financials Wednesday. They narrowly missed estimates.

Next week, HP itself reports third-quarter results as does Dell Inc. (Nasdqq: DELL), the No. 3 PC maker. Oracle (Nasdaq: ORCL), the No. 1 database developer, closes its first quarter in August and will report results in early September.

Last week, HP said it expected to report stronger-than-expected operating searnings, following an earlier quarterly prediction by arch-rival International Business Machines Corp. (NYSE: IBM).

A year ago, Cisco was buffeted by the easing demand for gear from European customers ailing from the slowdown, a decrease in public sector orders from federal and state governments and dealing with inefficient consumer electronics factories in Mexico that came with its acquisition of Scientific-Atlanta in 2006.

But Chambers and his management team have done a good job rebuilding value, said Amitabh Passi, analyst with UBS, who rates Cisco a "Buy" and sees it gaining share in blade servers against HP, as well as China's Huawei Technologies. "More consistent execution" over the past 12 months improves his opinion of Cisco's prospects.

As well, Cisco has now expanded its footprint into the video market since the closing of its $5 billion acquisition of NDS Group of the UK from private equity firm Permira Advisers and Rupert Murdoch's News Corp. (NYSE: NWS). The takeover bolsters Cisco's offerings in software, as well as conference and video services, which are much in demand by enterprises.

Still, the company is experiencing major competition from software providers or so-called "software defined networks," provided by rivals such as storage giant EMC Corp. (NYSE: EMC), which controls VMware (NYSE: VMW), the No. 1 specialist in virtualization software. With virtualization, companies can effectively design and manage entire networks in software alone.

But Tim Long, analyst with BMO Capital, said he didn't expect VMware's approach to threaten Cisco much in the near term.

Cisco shares have gained more than 7 percent in the past year, although they've lost 5 percent to date in 2012. They jumped 93 cents 9 cents to $18.26 after the earnings were announced, bringing the company's market capitalization to $93 bilion.