Cisco Turnaround On Track

By Mark Vickery

Beleaguered tech giant Cisco Systems (CSCO) continues its turnaround story after the bell Wednesday, posting its fifth consecutive positive earnings surprise in its first quarter 2012 (October) quarter. Cisco reported an adjusted (for amortization, impairment and restructuring) EPS of 38 cents, which topped the Zacks Consensus Estimate of 34 cents per share.

The company also provided a revenue beat for the quarter: $11.3 billion in sales (GAAP), up from the $11 billion expected in the Zacks Consensus Estimate. This marks the fifth quarter in a row of rising revenues.

So perhaps long-time CEO John Chambers has righted the ship - er, aircraft carrier - after all. Between laying off 9% of its workforce and conducting a well-timed stock buyback of 100 million shares at $15 and change (the stock ended the regular trading day at $17.61, and today was particularly bloody with the Nasdaq falling 3.9%) earlier this year, calls for Chambers to resign should continue to dwindle with today's solid beat.

The company posted $2.3 billion from cash flow operations in the quarter, which is another notable positive. During the earnings call, investors will be interested to hear if there has been any improvement in Cisco's routing and switchers or government businesses.

Typically, analysts had been dormant ahead of earnings - they tend to be in wait-and-see mode ahead of Cisco's quarterlies, upon which lots of volatility is also typical in the aftermath. A 2.2% bump following the earnings report is sending CSCO shares back up to $18 per share in the after-market. That's still down from the $22 range the stock was trading in last winter, but not too shabby.

No one should expect Cisco to be able to turn everything around overnight, especially in such a sluggish market. But considering what was expected - and how bad some people thought it might get - for the tech leader, things are looking pretty decent! for Cha mbers and company at the moment.

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