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Cisco Hikes Forecast For Annual Earnings, To Have Share Buybacks Worth $15 Bln

Cisco Hikes Forecast For Annual Earnings, To Have Share Buybacks Worth $15 Bln
Cisco Systems Inc expects to gain from increased prices of its products because of the global shortage of semiconductor chips as well as an expected eventual drop in costs for logistics and transportation as delays in shipment will abate. This prompted the company to raise its guidance for the full-year earnings of 2022.
Following the upbeat forecast, the stocks of the company rose by about 5 per cent in extended trading. Investors were also apparently impressed by the announcement by the networking firm of an increase of $15 billion to its stock repurchase program, coupled with quarterly results that were better than what the market was expecting.  
The core business of the company includes routers, switches, security services, and software products and it has invested heavily in its cloud product products so that it can keep up with a surge in demand during the pandemic for the company’s videoconferencing platform Webex, as well as its virtual private network and cybersecurity products.
"We're seeing progress as we drive the continued shift to more software and subscription revenue delivering growth," Chief Financial Officer Scott Herren told analysts.
However, the supply challenges globally that companies are facing because of the Covid-1`9 pandemic and which has increased costs for companies is expected to persist for the second half of its fiscal year, the company cautioned.
According to recent reports, Cisco is preparing to place a bid of $20 billion for the acquisition of Splunk Inc, a firm that offers makes software for searching and monitoring big data gathered from websites, applications, and devices.
"(The buyback) perhaps signals that Splunk is not going to happen because if they're giving $15 billion back, I would think they're not going to spend $20 billion on a company," said Scott Raynovich, principal analyst at Futuriom.
There was however no comment from the company to a query by analysts about the reported potential deal but executives of the company said that Cisco was "constantly evaluating potential opportunities."
The forecast of adjusted earnings for 2022 made by Cisco was between $3.41 and $3.46 per share, whereas it had previously projected it to be between $3.38 and $3.45 a share. The company expects revenues for the same period to increase by between 5.5 per cent and 6.5 per cent compared to its previous forecast of between 5 per cent and 7 per cent.
The company also reported a 6 per cent growth in its revenues for the second quarter at $12.72 billion, which was higher than the market estimate of $12.65 billion, according to IBES data Refinitiv. On an adjusted basis, Cisco earned 84 cents per share, 3 cents above estimates.

Christopher J. Mitchell

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