Today: After a brief respite, Silicon Valley's busy earnings season returns with Cisco (CSCO) leading Tuesday's pack, which includes Nvidia, NetApp and Applied Materials. Also: Wall Street still calm.
Cisco beats expectations, gives cautious optimism about economy
Silicon Valley's earnings season has slowed down in February, with only scattered reports from LinkedIn, Gilead, Zynga and Yelp since Facebook reported on Jan. 30. Cisco kicked off a big day for tech earnings Wednesday, however, and the company's growing revenues could signal that the global economy is returning to health as far as tech is concerned.
Cisco -- often considered a tech bellwether because companies that spend on their core networking equipment will likely go on to spend on software and other infrastructure -- announced record earnings for the final quarter of 2012, posting profits of 51 cents per share on sales of $12.1 billion, beating analyst estimates of 48 cents a share on $12.06 billion, according to Thomson Reuters.
"Cisco delivered record earnings per share this quarter and record revenue for the eighth quarter in a row in a challenging economic environment," Cisco CEO John Chambers said in Wednesday's news release. "We are making solid progress toward our goal of becoming the number one IT company in the world."
Chambers attempted to quell any excitement about the results in Wednesday's conference call, however, telling analysts and media that parts of the world are showing improvement, but it would take some time to ensure that it will continue.
"We are seeing early signs of stabilization in government spending and also in probably a little bit over two thirds of Europe," Chambers said. "But I want to watch that for at least another quarter before I get really excited about it."
Chambers is seeking modest 5 percent to 7 percent year-over-year growth in sales for the next few years, he has said, and Wednesday's report showed that could be the right plan: Sales in the last three months of 2012 increased 5 percent from the same period in 2011.
Profits, however, zoomed up 44 percent year-over-year, signaling that Cisco's cost-cutting is paying off -- San Jose's largest private employer laid off 1,200 workers in a 2012 reorganization, dumped 6,500 employees a year before that, and sold off its Belkin Router business last month.
The company has also moved into new fields in an attempt to diversify its offerings, buying San Francisco-based Meraki for $1.2 billion to gain entry into the cloud-networking field and agreeing to purchase Israel's Intucell for better offerings to wireless carriers.
While hopes were raised by Wednesday's news -- especially relative to Cisco's previous earnings report -- the effects of Cisco's moves and a growing economy may not show up immediately, hence Chambers' modest forecast and tentative excitement.
"There's limited opportunity for market-share gains in the core markets," JMP Securities analyst Erik Suppiger told the Wall Street Journal.
Cisco stock gained 0.8 percent in regular trading Wednesday to close at $21.14, but decline 1.9 percent in late trading after Chambers' cautious comments.
NetApp, Nvidia and Applied Materials announce earnings
Three other Silicon Valley companies reported earnings Wednesday, and all showed similar incremental but not earth-shattering improvement.
Sunnyvale storage-solutions company NetApp followed Cisco's pattern of much higher profits with a slight revenue increase. The company's profits of $158 million, or 43 cents a share, represented a 32 percent increase from the same period a year ago; revenues increased 4.1 percent to $1.63 billion.
Santa Clara graphics chipmaker Nvidia improved its profits by moving into the tablet sector, scoring with partnerships on Google's (GOOG) Nexus 7 tablet and Microsoft's Surface, but its forecast was smaller than expected. Analysts said Nvidia is likely to face increased competition in the mobile sector, leading to the cautious forecast.
Nvidia beat expectations by bringing in profits of 28 cents a share on revenues of $1.11 billion for the quarter, ending a year of record-breaking revenue and profits. However, the company forecast revenues in the current quarter of $940 million, while analysts expect performance closer to the quarter that just ended, predicting $1.07 billion.
Applied Materials, the Santa Clara supplier of manufacturing equipment for chipmakers, provided good news for the global tech economy, showing an increase in orders and rosier forecasts, although actual results were as poor as expected.
Applied reported profits of 3 cents a share on revenues of $1.57 billion, but CEO Mike Splinter said that orders in the current quarter are up 80 percent, and projections for the current quarter were strong at $1.81 billion to $1.97 billion; analysts had projected forecasts of $1.8 billion.
On Wall Street, NetApp gained 1.2 percent to $35.82 in regular trading, then fell 2 percent after-hours; Nvidia dropped 0.5 percent to $12.37, then declined another 1.5 percent in late trading; and Applied Materials increased 0.8 percent to $13.77 in the normal session and moved another 3 percent higher after-hours.
Wall Street little changed as Facebook and Netflix gain
Wall Street continued to be calm after a strong start to 2013, with the most movement coming in the tech-heavy Nasdaq, which gained 0.3 percent Wednesday.
Even Apple (AAPL), which has been extremely volatile of late, managed a quiet day on the markets, dropping 0.2 percent to $467.01. The company made plenty of news, however, announcing a cut in prices for specific MacBooks after a dip in sales and dealing with David Einhorn's investor lawsuit, a copycat suit filed Wednesday, and the government's e-books charges.
Facebook broke out of a recent slump, gaining 2 percent as some of the investor lawsuits stemming from its initial public offering were dropped. Netflix's (NFLX) strong run continued with a 4.7 percent gain to $186.27 after a price-target boost from JPMorgan.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 10.39, or 0.33 percent, to 3,196.88
The blue chip Dow Jones industrial average: Down 35.79, or 0.26 percent, to 13,982.91
And the widely watched Standard & Poor's 500 index: Up 0.9, or 0.06 percent, to 1,520.33
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.