Cisco CFO: We Have to Be Prudent

SAN JOSE, Calif. (TheStreet) -- Cisco(CSCO) may be rebounding, as evidenced by it strong second-quarter results this week, but CFO Frank Calderoni says the Dow component still needs to tread a careful financial path.

After comfortably beating Wall Street's revenue and earnings forecast, there some raised eyebrows over the company's cautious third-quarter guidance, which called for year-over-year revenue growth between 5% and 7%.

Calderoni, however, says that Cisco's not getting carried away.

Cisco's CFO Frank Calderoni

"We're taking this one step at a time -- we have made a significant transformation in the company in the last several quarters," explained Calderoni. "It's prudent for us to be conservative -- we want to be able to set expectations around our three-year model."

The three-year business model, announced back in September, includes growing revenue faster than profit, something which is already happening, according to Calderoni. "We have been able to demonstrate that in the first half of fiscal 2012," he said.

The Cisco finance chief explained that there's still "a level of concern" with regard to various economies around the world, referring to the ongoing debt problems in Europe.

Nonetheless, Cisco's results indicate that the company's problems are starting to disappear in the rearview mirror.

This time last year the switch maker was still wrestling with execution problems, weak consumer spending and stiff competition from the likes of Juniper(JNPR) and HP(HPQ).

Now, however, after undergoing a massive corporate overhaul, Cisco is a much different proposition for investors.

On Wednesday, Cisco reported second-quarter revenue and earnings of $11.5 billion and 47 cents per share, respectively, up from $10.4 billion and 37 cents per share in the prior year's quarter. Analysts were looking for sales of $11.23 billion and earnings of 43 cents per share.

Crucially, Cisco's switching revenue, which accounts for almost a third of total sales, climbed 8% year-over-year during the second quarter. The company's routing revenue, which makes up just under a fifth of the company's sales, also grew 8%.

Cisco also announced plans to beef up its dividend this week, lifting its quarterly payout by 33% to 8 cents a share from 6 cents. The San Jose, Calif.-based company had recently come under pressure to increase its quarterly payment, most notably from consumer advocate Ralph Nader.

Calderoni, however, reiterated Cisco's commitment to its dividend.

"There were some skeptics that said we weren't supporting the dividend, but we are supporting the dividend and we will continue to support the dividend," sniffed the Cisco CFO. "We have only had the dividend a year, and to have it increase 33% is a step in the right direction."

Cisco shares have risen almost 10% this year.

--Written by James Rogers in New York.

>To follow the writer on Twitter, go to http://twitter.com/jamesjrogers.

>To submit a news tip, send an email to: [e-mail].

>To order reprints of this article, click here: Reprints