Cisco's Dividend, Buyback Increase

   (FROM THE WALL STREET JOURNAL 2/11/16) 
   By Don Clark 

Cisco Systems Inc. posted a 31% jump in quarterly net profit on Wednesday, but showed signs that weakening economic conditions have taken a toll on the businesses that the networking equipment giant serves.

The San Jose, Calif.-based company, whose results are closely watched as an indicator of corporate technology demand, also boosted its quarterly dividend and stock-buyback plan, and projected stronger revenue for the current quarter than some analysts had expected.

Its shares, off 17% since the beginning of 2016, rose 7% in after-hours trading following the news.

Cisco's numbers for the period ended in January showed both positive and negative signs, which the company attributed partly to steady buying by telecom services and caution among other corporate customers.

For example, the company said revenue grew 5% in a routing equipment segment that had been shrinking lately, a category of hardware largely purchased by communications carriers. Video equipment purchased by carriers rose 37%.

But sales of switching gear -- Cisco's largest single business -- declined 4%, reversing a recent pattern. Revenue for Cisco's data center group, led by sales of server systems, declined 3% after growing 24% in the period ending in October.

Chuck Robbins, Cisco's chief executive, said the company began hearing signs of caution among some corporate customers in January, toward the end of the quarter. In response to developments such as declining stock prices, he said, companies began holding up orders on nonessential purchases such as some types of the switching systems used on corporate campuses.

On the other hand, Cisco seems to have gotten past a long-term slide in its business in China.

Cisco has faced an industrywide shift of some networking functions to software from the hardware that has been its specialty. Mr. Robbins and predecessor John Chambers, who gave up the CEO job last summer, have responded by trying to build new software and services that can generate recurring revenues.

To underscore Cisco's belief that it can weather the current turbulence, the company on Wednesday raised its quarterly dividend by 24% and increased its stock-buyback plan by $15 billion.

In all, Cisco reported that net profit for the period ended Jan. 23 rose to $3.15 billion, or 62 cents a share, up from $2.4 billion, or 46 cents a share.

Total revenue slipped slightly to $11.93 billion from $11.94 billion a year ago.

(END) Dow Jones Newswires

February 11, 2016 02:48 ET (07:48 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.