BMO Capital Markets analyst Tim Long (Outperform, $25)
"Cisco results and guidance were largely as we expected. Revenues were slightly better, but it sounds like backlog is building, which could bode well for the July and October quarters. Gross margins were at a 10-year low level as volumes dropped and mix hurt. We see a recovery as switching and routing exit their product transition phases in a few quarters. Opex was way lower in the January quarter, but is guided higher for April. The company aggressively bought back stock with $4 billion of purchases in the quarter, though we expect some slowdown the rest of the year, and CSCO also increased its quarterly dividend by 12% to $0.19/share."
Jefferies analyst George Notter (Hold, $22)
"As expected, Emerging Markets, Service Provider, and high-end Routing/Switching product transitions negatively impacted fiscal Q2 results. Product margins were particularly affected by top line weakness. We remain on the sidelines with respect to the stock given the still-choppy IT spending environment." "The $4.0B buyback was impressive this quarter - their largest quarterly share repurchase prior to the January quarter was $2.0B in October 2013 and $2.5B back in the October 2011 quarter. Also, the Board approved a $0.02 raise in the quarterly dividend (to $0.19 per share). Given that they only have $3.3B in US-based cash on the Balance Sheet (vs. $6.2B last quarter), Cisco will float a new debt issuance in the April quarter to fund the more aggressive capital return strategy."--Written by James Rogers in New York. Follow @jamesjrogers >Contact by Email.
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