Cisco Systems (NASDAQ:CSCO) Beats Q3 EPS Estimate, but Shares Fall on Weaker Revenue Forecast

Shares of Cisco Systems Inc. (NASDAQ:CSCO) fell by more than 7% in after-hours trading today after the company reported lower revenue on a yearly basis in its third fiscal quarter and also forecast weaker revenue in the fourth quarter.

In the three months ended April 29th, the Cisco posted revenue of $11.9 billion, down 1% year over year, driven by weaker service revenue and flat product revenue.

Despite the decline, CEO Chuck Robbins said he was pleased with the company’s progress in transforming its business.

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“The Network is becoming even more critical to business success as our customers add billions of new connections to their enterprises,” Robbins said in a May 17 release.

Net income on a non-GAAP basis totaled $3.0 billion, or $0.60 cents per share, up 5% on a yearly basis.

Wall Street analysts on average estimated EPS of $0.58 cents per share.

For the fourth quarter, Cisco expects its revenue to fall between 4% and 6%, while non-GAAP EPS is projected to range between $0.60 cents and $0.62 cents.

Cisco Third Quarter Fiscal 2017

Cash Flow, Shareholder Returns

Cisco’s cash flow from operating activities in the third quarter totaled $3.4 billion, representing a 10% year-on-year increase.

During the period, the company declared and paid cash dividends totaling $1.5 billion, and also bought back about 15 million shares at $33.71 apiece for a total of $500,000 under its stock repurchase program.

“We will continue to invest in growth areas as we move the business toward more software and recurring revenue and return value to shareholders,” CFO Kelly Kramer commented.

Takeover Spree

Cisco, which finalized its previously reported acquisition of AppDynamics in the third quarter, announced a trio of acquisitions in just the first half of May.

The company on May 1st, announced its plan to acquire privately held software firm Viptela Inc. for $610 million.

The acquisition, which is expected to close in the second half of calendar 2017, will expand Cisco’s software-defined wide area network portfolio.

Cisco followed this up with the proposed takeover of Saggezza’s Advanced Analytics team and associated advanced analytics intellectual property on May 4th. Saggezza is a privately held technology services company.

This deal is anticipated to close in the fourth quarter of fiscal 2017.

The company, meanwhile, intends to spend $125 million to buy privately held artificial intelligence company MindMeld Inc.

MindMeld has spearheaded the development of an AI platform that allows customers to build human-like conversational interfaces for any application or device.

The transaction, which was announced on May 11, is expected to close in the Cisco’s fourth quarter.

Job Cuts

Cisco in August 2016 disclosed that it will be laying off up to 5,500 jobs as part of a restructuring plan. The company extended that plan in May to cover a further 1,100 employees.

Cisco’s shares are down 7.69% after hours at $31.22.