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Cisco Sees Slow and Steady Start to 2013

Wednesday, 13 Feb 2013 | 4:55 PM ET
Cisco's CEO: Very Comfortable With Our Gross Margins
Cisco is reporting Q2 earnings per share at $0.51 and revenue of $12.1 billion. Cisco Systems Chairman & CEO John Chambers offers insight on the quarter, and how his company is planning on putting its cash to work.

Cisco topped Wall Street expectations with its earnings report Wednesday, helped in part by favorable taxes, and its outlook was in-line with forecasts.

"I think what our customers are telling us is a very slow start and steady improvement throughout the year," CEO John Chambers said on CNBC's "Closing Bell."

What's Cisco stock doing now? (Click here for the latest after-hours quote.)

For the fiscal third quarter, Cisco expects non-GAAP revenue growth of 4 percent to 6 percent and adjusted earnings per share of 48 cents to 58 cents.

Cisco earned $2.7 billion, or 51 cents per share, excluding items in the fiscal second quarter, compared with $2.6 billion, or 47 cents per share, in the same period a year earlier. Revenue was $12.1 billion, up from $11.53 billion.

"The results were pretty good. They were better than expected but, at the same time, it was expected they'd beat. It'll pretty much going to boil down to guidance now," said Shaw Wu, an analyst at Sterne Agee. "They did say they got a benefit from taxes. When you take that out, its 50 cents. That still beat by 2 cents," Wu said.

Analysts had expected the company to report earnings excluding items of 48 cents a share on $12.06 billion in revenue, according to a consensus estimate from Thomson Reuters.

Cisco's gross margin narrowed to 60.1 percent from 61.3 percent a year ago, Chambers said, adding that the company is "very comfortable" with its gross margin.

"We are growing in this market when peers are seeing flat growth," Chambers said.

(Read More: Cisco CEO: No Plans to Hire in US—Unless Tax Policy Changes)

While the company faces ongoing weakness in southern Europe, Chambers told CNBC that the region is potentially showing signs of improvement.

Chambers also told CNBC that the company plans to grow through acquisitions, particularly overseas.

— Reuters contributed to this article.

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