The networking sector hasn't been feeling well in 2012. From Juniper Networks (Nasdaq: JNPR ) to Tellabs (Nasdaq: TLAB ) , all you see is one miss after another. Most of the time, a telecommunications sector that doesn't want to build out its networks has been to blame. Tellabs saw delayed orders turn into cancellations; Juniper simply pointed to "reduced spending by some of our largest customers."
That background may have turned the stomachs of Cisco Systems (Nasdaq: CSCO ) investors heading into Wednesday night's report. An industry climate is an industry climate, after all, and Cisco depends on selling a ton of high-end equipment to those reticent telecoms.
But my fellow Fool Paul Chi wasn't too worried. He expected a solid second-quarter report followed by modest guidance in the Juniper mold. And that's pretty much what happened.
Cisco's sales jumped 11% year over year to $11.5 billion and non-GAAP earnings increased 27%, to $0.47 per share. That's slightly ahead of Wall Street's projections, and Cisco's management expected just an 8% revenue boost at best.
The company also boosted its dividend by 33%, to $0.08 per share for the quarter. CFO Frank Calderoni simply credited "the strength of our business" for motivating the increase. And in another sign that at least some of those supposedly industry-wide telecom worries really point to a shift in market shares, Cisco credited Big Red, network operator Verizon (NYSE: VZ ) , for driving sales of its highest-end mega routers. For those of you keeping score at home, the first signal in this direction came from optical networking specialist Infinera (Nasdaq: INFN ) and it made me feel pretty stupid.
All things considered, I think we can lay to rest the idea that American telecoms aren't investing in their networks today -- they're just buying their stuff from a different set of vendors. And Cisco is on the winning side of this market shift.
Infinera and Cisco made me look dumb, but I'll get over it. Nobody -- including us CAPS all-stars -- bats 1.000 in this brutal market. But some elite investors never look stupid – in fact, you wouldn't believe what those geniuses are buying today while everyone else is selling.