Light Reading

Cisco Disappoints With Q1

Light Reading
News Analysis
Light Reading
11/9/2004
50%
50%

Cisco Systems Inc. (Nasdaq: CSCO) shares sagged in early after-hours trading after the company's first-quarter earnings didn't match investor expectations.

For its first quarter, which ended October 30, Cisco reported net income of $1.4 billion, or 21 cents per share, on revenues of $6 billion, compared with net income of $1.4 billion, 20 cents per share, on revenues of $5.9 billion for the previous quarter.

For its first quarter last year, Cisco reported net income of $1.1 billion, 15 cents per share, on revenues of $5.1 billion.

Taking away the roundoff factor, Cisco's revenues were $5.97 billion, barely missing analysts' expectations of $6.02 billion. More important, net income of 21 cents per share matched analysts' average estimates as reported by Reuters Research -- but investors have grown accustomed to Cisco beating estimates by a penny.

Not surprisingly, Cisco stock took an immediate turn south in after-hours trading. Early trades were down as much as 51 cents (3%) from today's closing price of $19.75. It probably doesn't help that Cisco's stock had run up recently, increasing 9 percent since October 25.

Cisco had warned that the first quarter ending October 27 would be weak, with revenues growing by 2 percent at most (see Cisco's Q4 Not All Smiles).

Chambers added that second-quarter revenues would be up just 1 to 3 percent, or $6.03 billion to $6.15 billion. Prior to today's earnings announcement, analysts were anticipating $6.21 billion in revenues for the January quarter, according to Reuters.

The guidance percentages didn't surprise everyone, however. Analyst Mark Sue of RBC Capital Markets had predicted Cisco's "1-to-3 percent" guidance range this morning, in a note previewing Cisco's call.

Cisco did drop some glum notes during the call. The book-to-bill ratio for Cisco's first quarter was less than 1.0, an indication that orders slowed down. Chambers also noted "a lot of lumpiness in our router business," citing possible reasons including increased Asian competition and the introduction of new products including the CRS-1 core router (see Cisco Unveils the HFR).

Cisco's board also approved a $10 billion addition to the company's stock buyback program, which has been ongoing since 2001. The buyback program now measures $25 billion total, about $15 million of which remains unspent.

— Craig Matsumoto, Senior Editor, Light Reading




For more info on the state of industry financials, check out the coming Light Reading Live! event:

(34)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 4   >   >>
gumbydammit
50%
50%
gumbydammit,
User Rank: Light Beer
12/5/2012 | 1:06:15 AM
re: Cisco Disappoints With Q1
....why this report is so disappointing?

We're expecting 20% Y/Y growth *and* we're disappointed when they only accomplish that?

Now thats a disappointment I wish we would see more of.
/gd.
change_is_good
50%
50%
change_is_good,
User Rank: Light Beer
12/5/2012 | 1:06:11 AM
re: Cisco Disappoints With Q1
>> The 4 year average show 0% Growth.

what $20b networking company has shown significant growth over the last 4 years?

yea, they have been beat down, but i think there is some upside. they are not a half a trillion dollar company like the past but they are still a player.

what networking company is not overvalued?

slayer666
50%
50%
slayer666,
User Rank: Light Beer
12/5/2012 | 1:06:11 AM
re: Cisco Disappoints With Q1
The fact is Cisco revenues are flat...2001 they were $22B slipping to $19B in 2002,2003, and are now at $22B again...The 4 year average show 0% Growth. Their income has grown but you can only chop expenses for so long before impact new product delivery...They have about $25B cash if you look at Assests-Liabilities...but if they don't show some top line growth, you have to say they are not worth $133B market cap!

2x to 3x revenue if you are lucky!
slayer666
50%
50%
slayer666,
User Rank: Light Beer
12/5/2012 | 1:06:10 AM
re: Cisco Disappoints With Q1
Understood...but, if the days of 50-100% growth are not coming back, then the market cap gets Tad-Tad...(that's Chop-chop with a machete)accordingly.

Just my 2 billion cents...
dwdm
50%
50%
dwdm,
User Rank: Light Beer
12/5/2012 | 1:06:09 AM
re: Cisco Disappoints With Q1
I agree that they are doing really well. They have a ton of cash, their sales look very healthy, no debt etc.. however the market needs to see Cisco back in the 20-30% growth quarter over quarter vs year over year. I think the key for Cisco is going to be markets that are outside the US going forward. Having about half of your business just from the US, means you can grow a lot more outside. That is just my opinion..
technoboy
50%
50%
technoboy,
User Rank: Light Beer
12/5/2012 | 1:06:07 AM
re: Cisco Disappoints With Q1
Cisco is not now nor were they ever worth what their market cap states. They are not growing in the key strategic markets enough to offset the increased competition in their core business. They will not take on a large merger while Chambers is in charge so they will continue to be what they have always been. A decent networking company that does not innovate but markets better than most companies. Like the other previous post stated 0% growth since 01. Sounds like a major change is required.
freetoair
50%
50%
freetoair,
User Rank: Light Beer
12/5/2012 | 1:06:05 AM
re: Cisco Disappoints With Q1
Techno makes a good observation:

"They are not growing in the key strategic markets enough to offset the increased competition in their core business."

I would suggest that is due to thier total lack of technology innovation and engineering leadership.

i.e. No New Products or Markets.

Relying on the core business is great - but sooner or later it just becomes a commodity. As other posters noted this is happening.

santalk2000
50%
50%
santalk2000,
User Rank: Light Beer
12/5/2012 | 1:06:04 AM
re: Cisco Disappoints With Q1
I don't agree with you.
I think this is one of the cheap (considering profitability).

Revenue ForPE MarketCap
Microsoft Corp 37.81B 21.42 323.45B
Intel Corp 33.35B 20.79 145.93B
Cisco Systems 22.04B 19.55 131.35B
Dell Inc 45.38B 24.46 93.45B

Coca-Cola Co (Coke) 21.88B 19.83 99.78B
Gillette Co 9.99B 23.12 43.16B
American Express 28.44B 17.74 68.57B
can go on...
DoTheMath
50%
50%
DoTheMath,
User Rank: Light Beer
12/5/2012 | 1:06:04 AM
re: Cisco Disappoints With Q1
If they are talking about Asian competition, things must be getting a bit dicey on the pricing front. Cisco gear is solid, but way overpriced. Gross margin of 67% is hard to justify even in a high innovation business, and Cisco is not exactly a high innovation business. They have relied on outstanding execution, and major strategic mistakes by the competition.

We can count on Cisco executing well, but the environment will become increasingly price-competitive. Margin pressure will become severe. Think of what happened to EMC to understand what potentially can happen to Cisco. EMC has essentially reinvented itself as a software company going after the likes of Veritas. But they went through serious pain and many company-altering acquisitions to get there.

Given all these, I believe Cisco's stock is still overvalued.
fabius
50%
50%
fabius,
User Rank: Light Beer
12/5/2012 | 1:06:00 AM
re: Cisco Disappoints With Q1
Cisco is definitly lacking the innovating spirit and they are not able to recognize the need of it.
They think you can just buy the innovation by acquiring companies but what they do not understand is that innovation is a state of mind that you must cultivate in order to obtain results.
Cisco is acquiring innovative companies imposing the Cisco way and destroying all the innovation push.
Until IOS is generating revenues they have their point ......
Page 1 / 4   >   >>
Educational Resources
sponsor supplied content
Educational Resources Archive
From The Founder
Against the odds, Huawei is growing its telecoms networking equipment business in the US -- that should be ringing some alarm bells for domestic vendors.
Flash Poll
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
Between the CEOs
CEO Chat With Jeff Miller, ActiveVideo

8|28|15   |   19:05   |   (0) comments


Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
LRTV Huawei Video Resource Center
Vodafone: Mobile Money Is About Customer Trust

8|27|15   |   06.36   |   (0) comments


Light Reading spoke with Vodafone's Ian Ravenscroft about the unique responsibilities and opportunities facing operators handling customers' financial transactions over the network.
Telecom Innovators Video Showcase
Palo Alto Networks on Expanding in the Carrier/Service Provider Market

8|26|15   |   07:54   |   (0) comments


Alfred Lee from Palo Alto Networks tells Steve Saunders about their new chassis-based system, the PA-7080, and how it can benefit service providers compared to legacy firewalls.
LRTV Custom TV
Global Services Forum Preview

8|25|15   |   02:36   |   (0) comments


Light Reading's CEO and Founder Steve Saunders talks about Huawei's upcoming Global Services Forum with the help of Heavy Reading's Patrick Donegan and Teresa Mastrangelo.
Telecom Innovators Video Showcase
Infoblox on DNS Threat Index

8|19|15   |   04:39   |   (0) comments


Dilip Pillaipakam from Infoblox talks to Steve Saunders about his company's core network services.
Between the CEOs
CEO Chat With Ihab Tarazi, Equinix

8|14|15   |   20:18   |   (1) comment


Equinix CTO Ihab Tarazi talks to Light Reading founder and CEO Steve Saunders about the dramatic changes in the data center, cloud and interconnect markets and discusses the impact of SDN and NFV in the coming years.
Telecom Innovators Video Showcase
The Netformx Ecosystem

8|14|15   |   09:39   |   (1) comment


Ittai Bareket, CEO of Netformx, talks with Steve Saunders about the Netformx Ecosystem, which employs cutting-edge prescriptive analytics to help solution providers maximize profits.
Telecom Innovators Video Showcase
Versa Networks on Leveraging VNFs

8|12|15   |   07:37   |   (0) comments


Kumar Mehta, founder and CEO of stealth mode startup Versa Networks, talks with Steve Saunders about how providers can best leverage virtualized network functions (VNFs).
LRTV Custom TV
Transforming the Network Through OPNFV

8|5|15   |   7:09   |   (0) comments


Sandra Rivera, VP Data Center Group; GM Network Platforms Group, Intel Corporation, on OPNFV Arno and how the industry is coming together to accelerate the deployment of NFV and transform the network.
LRTV Huawei Video Resource Center
Huawei ONS Product Demo

8|3|15   |   6:01   |   (0) comments


Huawei shows at Open Networking Summit 2015 in Santa Clara how its SDN and NFV solutions embrace openness.
LRTV Custom TV
End-User or Enterprise Benefits to the New IP

7|30|15   |   04:27   |   (1) comment


Andrew Coward discusses what the New IP means to end users or enterprise customers. He explains compelling reasons, including how every customer can get their own network, from the transformation to the New IP.
LRTV Custom TV
Network Visibility & the New IP

7|30|15   |   02:23   |   (0) comments


Mukund Srigopal provides an explanation of what network visibility is and how it is essential as service providers transition to the New IP. In addition, the importance of the network packet broker is discussed.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
December 2, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
Cisco's cloud and virtualization portfolio can increase business agility and innovation by building a more flexible network architecture.
Hot Topics
T-Mobile CEO Plays Data Traffic Cop
Sarah Thomas, Editorial Operations Director, 8/31/2015
Verizon Hums a Driving Tune
Sarah Thomas, Editorial Operations Director, 8/26/2015
CEO Chat With Bill Gates
Steve Saunders, CEO and founder, Light Reading, 8/31/2015
Time to Monetize Cable WiFi
Alan Breznick, Cable/Video Practice Leader, 8/31/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
The scene: Last Saturday, lunchtime, the interior of a shi-shi-foo-foo eatery in Manhattan's SoHo district.
Jeff Miller, President and CEO of ActiveVideo, talks to Light Reading founder and CEO Steve Saunders about the impact of virtualization on the TV and video distribution market.
Cats with Phones
Tastes Like Fish Click Here
Please hold while I lick the phone.