Light Reading

Cisco Disappoints With Q1

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

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
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   >   >>
Flash Poll
LRTV Documentaries
Cable Eyes Big Technology Shifts

4|16|14   |   03:02   |   (4) comments


US cable engineers are facing a lot of heavy lifting in the coming years, notes Light Reading Cable/Video Practice Leader Alan Breznick.
LRTV Custom TV
Maximizing Customer Experience & Assuring Service Delivery in an IP World

4|15|14   |   4:57   |   (0) comments


Steven Shalita, VP of Marketing, NetScout Systems, Inc., discusses the challenges cable/MSO operators face in assuring the delivery of new IP-based services. Key points include the value of proactively managing performance, and using rich analytics and operational intelligence to better understand service and usage trends, make smarter business decisions and ...
LRTV Documentaries
Bye-Bye DVD: Consumers Embrace Digital Video

4|10|14   |   04:17   |   (7) comments


Veteran video analyst Colin Dixon, founder and principal analyst of nScreenMedia, says research shows 56% are using digital video already.
LRTV Documentaries
Video: TW Cable Puts Multicast Gateways to the Test

4|8|14   |   04:13   |   (1) comment


Tom Gonder, a chief architect at Time Warner Cable, explains how its trial of multicast gateways is impacting IP-based video plans.
LRTV Custom TV
Managing & Monetizing Big Data in Operator Environments

4|7|14   |     |   (1) comment


At Mobile World Congress, Gigamon's Director of Service Provider Solutions, Andy Huckridge, and Heavy Reading Analyst Sarah Wallace discuss the 'big data' issues facing carriers and operators today.
LRTV Huawei Video Resource Center
Data Center Energy – Build Your Data Center in a Modular Way

4|7|14   |   2:13   |   (0) comments


Dr. Fang Liangzhou, VP Network Energy Product Line, shared his thoughts about the challenges for data centers during CeBIT 2014.
LRTV Huawei Video Resource Center
Agile Network Solution – An Overview of Huawei's Agile Network Solution

4|7|14   |   2:31   |   (0) comments


Ajay Gupta, Director of Product Marketing, Networking Product Line, gives an overview of the Agile Network Solutions during CeBIT 2014.
LRTV Huawei Video Resource Center
Huawei’s eLTE Voice Trunking, Video and Data Applied for Railways

4|7|14   |   1:38   |   (0) comments


Gottfried Winter is the Sales Director at Funkwerk, a German specialist in GSM-r terminals and a long-time partner of Huawei. At CeBIT 2014, Winter talks to Light Reading about this partnership and the integration of enhanced voice trunking, video and data functions.
LRTV Huawei Video Resource Center
LeaseWeb Speaks Highly of Huawei's Datacenter Products

4|7|14   |   1:37   |   (0) comments


Rene Olde Olthof, Operations Director LeaseWeb, talks about the next data center transformation during CeBIT 2014.
LRTV Documentaries
Comcast: Reshaping the Cable Network Architecture

4|3|14   |   07:11   |   (8) comments


Shamim Akhtar, Comcast's architect and senior director of network strategy, explains why the cable company is moving to a more distributed network architecture.
LRTV Custom TV
VMware CEO Pat Gelsinger at Mobile World Congress

4|1|14   |   3:41   |   (0) comments


VMware CEO Pat Gelsinger speaks to Heavy Reading about the value of virtualization spanning from the data center to service provider networks to mobile devices.
LRTV Huawei Video Resource Center
Analysts' Impressions of Huawei SoftCOM at ONS 2014

4|1|14   |   1:11   |   (0) comments


After visiting the Huawei booth at ONS, Lee Doyle of Doyle Research gives his appraisal of Huawei's SoftCOM solution.
Hot Topics
BlackBerry Invests in Healthcare IT Startup
Sarah Reedy, Senior Editor, 4/15/2014
Volvo: AT&T HSPA+ Can Drive My Car
Sarah Reedy, Senior Editor, 4/16/2014
T-Mobile Petitions Operators to Kill Overages
Sarah Reedy, Senior Editor, 4/14/2014
Cisco & VMware Are Apple & Google of SDN
Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/14/2014
Mobile Apps Susceptible to Heartbleed, Too
Sarah Reedy, Senior Editor, 4/14/2014
Like Us on Facebook
Twitter Feed