Cisco's Chambers Delivers, and the Shares Surge

NEW YORK ( TheStreet) -- Cisco ( CSCO) investors breathed a sigh of relief on Thursday following the company's solid fiscal fourth-quarter results and its surprise dividend increase.

Shares of the networking giant climbed 9.6% to $19.02 Thursday, boosted by the tech bellwether's comments on its conference call and interviews. The results also lifted shares of networking firms Riverbed ( RVBD) and Alcatel-Lucent ( ALU), which gained 4.7% and 3.5%, respectively. Cisco rivals HP ( HP) and Juniper ( JNPR) were up 1.6% and 1.1%.

Despite concerns about a weak global economy, Cisco struck a positive tone during the call. The themes of the previous quarter were caution and weak guidance, but this time Cisco had a number of achievements to talk about.

After warning of deteriorating orders in its fiscal third quarter, Cisco "noted a marked improvement over the past eight weeks," said Nomura Equity Research analyst Stuart Jeffrey in a note released Thursday. "Declines in Europe are set to deepen, but North America and Asia are showing signs of improvement."

Cisco's fourth-quarter revenue from Europe, the Middle East and Africa (EMEA) slipped 4.5% from a year earlier. Revenue from the Americas, however, climbed 7.3%, while Asia sales increased 7.9%.

Boosted by its U.S. enterprise business, Cisco grew its Americas product orders 4%, and it was three times that amount in Asia. EMEA product orders slumped 6%.

During an interview after the market close Wednesday, CEO John Chambers said the company's enterprise business could be better. The San Jose, Calif.-based firm, he said, plans to replicate its service provider strategy to tap more dollars in the enterprise industry.

While Cisco's announcement of another round of layoffs last month prompted concern that the firm's recent turnaround was slowing, its latest results suggest the contrary.

"Cisco executes very well in a tough environment," Topeka Capital Markets analyst Brian White said in a note. The company's fiscal first-quarter guidance, he added, is cautious, but "good enough."

For its fiscal first quarter, Cisco expects revenue growth, excluding its NDS acquisition, of 2% to 4%. Including NDS, the company expects first-quarter year-over-year revenue growth of 4% to 6%.

Excluding items, Cisco predicts first-quarter earnings of 45 to 47 cents a share. Analysts surveyed by Thomson Reuters were looking for earnings of 46 cents a share.

Among Cisco's specific product categories, switching remains the 800-pound gorilla, contributing almost a third of the company's overall fourth-quarter revenue of $11.69 billion. Switching sales, however, were flat year-over-year.

Services was the next biggest revenue driver, accounting for 22% of sales and growing 12% compared to the fiscal fourth quarter of 2011. The services growth reflects Chambers' desire to sell a broader mix of products and services to customers, encompassing services, software and hardware, as opposed to standalone products.

Another key area for Cisco is its data center business. Although still a relatively small part of the company's sales, data center revenue climbed 90% year-over-year, driven by 58% booking growth in its UCS server product.

Cisco's cash strategy is also resonating with investors, most notably its decision to increase its dividend by a massive 75%. Speaking during the company's conference call, CFO Frank Calderoni said Cisco plans to return at least 50% of its free cash flow annually to shareholders in the form of dividends and share repurchases.

"The increase in dividend payments and the clear cash distribution strategy further adds to the appeal of the stock, in our view," said Nomura's Jeffrey. " The cash distribution policy is set to broaden Cisco's shareholder base."

--Written by James Rogers in New York.

>To submit a news tip, send an email to: tips@thestreet.com.

Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices

More from Technology

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Tesla CEO Elon Musk Is a Rock Star: Kiss Icon Gene Simmons

Tesla CEO Elon Musk Is a Rock Star: Kiss Icon Gene Simmons

Listen: Should You Buy Cisco Now?

Listen: Should You Buy Cisco Now?

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense