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   >   >>
Flash Poll
From The Founder
Last week I dropped in on "Hotlanta," Georgia to moderate Light Reading's inaugural DroneComm conference – a unique colloquium investigating the potential for drone communications to disrupt the world's telecom ecosystem. As you will see, it was a day of exploration and epiphany...
LRTV Documentaries
Verizon's Emmons: SDN Key to Cost-Effective Scaling

5|22|15   |   03:53   |   (0) comments


For Verizon and other network operators to ramp up available bandwidth cost effectively, they need to move to SDN and agree on how to do that.
LRTV Documentaries
Lack of Universal SDN a Challenge

5|21|15   |   04:51   |   (3) comments


Heavy Reading Analyst Sterling Perrin talks about how uncertainty about SDN standards and approaches may be slowing deployment.
LRTV Custom TV
Steve Vogelsang Interview: Carrier SDN

5|20|15   |   05:02   |   (0) comments


Sterling Perrin speaks to Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, about the new Carrier SDN-enabling Network Services Platform and the operator challenges it solves.
LRTV Custom TV
Carrier SDN: On-Demand Networks for an On-Demand World

5|20|15   |   20:52   |   (0) comments


Steve Vogelsang, Alcatel-Lucent CTO for IP Routing & Transport business, talks about requirements and benefits of Carrier SDN during the keynote address at the Light Reading Carrier SDN event May 2015.
LRTV Documentaries
The Security Challenge of SDN

5|19|15   |   02:52   |   (0) comments


CenturyLink VP James Feger discusses concerns that virtualization could create new vulnerabilities unless network operators build in safeguards.
LRTV Custom TV
NFV Elasticity – Highly Available VNF Scale-Out Architectures for the Mobile Edge

5|18|15   |   5:50   |   (0) comments


Peter Marek and Paul Stevens from Advantech Networks and Communications Group talk about their NFV Elasticity initiative and the company's latest platforms for deploying virtual network functions at the edge of the network. Packetarium XL and the new Versatile Server Module: 'designed to reach parts of the network that other servers cannot reach.'
LRTV Huawei Video Resource Center
Bay Area Spark Meetup 2015

5|14|15   |   3:54   |   (0) comments


Developed in 2009, Apache Spark is a powerful open source processing engine built around speed, ease of use and sophisticated analytics. This spring, Huawei hosted a meetup for Spark developers and data scientists in Santa Clara, California. Light Reading spoke with organizers and attendees about Huawei's code contributions and long-term commitment to Spark.
LRTV Custom TV
The Transport SDN Buzz

5|12|15   |   06:01   |   (1) comment


Sterling Perrin, senior analyst at Heavy Reading, speaks with Peter Ashwood-Smith of Huawei and Guru Parulkar of ON.Lab about the evolution of transport SDN and the integration of technologies.
LRTV Custom TV
Next-Generation CCAP: Cisco cBR-8 Evolved CCAP

5|5|15   |   04:49   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explained the innovation design of Cisco's cBR-8, the industry's first Evolved CCAP, including DOCSIS 3.1 design from ground-up, distributed CCAP with Remote PHY and path to virtualization. Cisco's cBR-8 Evolved CCAP is the platform that will last through the transitions.
LRTV Custom TV
Meeting the Demands of Bandwidth & Service Group Growth

5|1|15   |   5:35   |   (0) comments


Jorge Salinger, Comcast's Vice President of Access Architecture, explains how DOCSIS 3.1 and multi-service CCAP can meet the demands of the bandwidth and service group growth.
LRTV Custom TV
DOCSIS 3.1: Transforming Cable From Hardware-Defined Network to Software-Defined Network

4|29|15   |   03:48   |   (0) comments


John Chapman, Cisco's CTO of Cable Access Business Unit and Cisco Fellow, explains how DOCSIS 3.1 can transform cable HFC network to a more agile software-defined network.
LRTV Huawei Video Resource Center
Predicting Traffic Patterns for Quality Mobile Broadband

4|29|15   |   6:45   |   (0) comments


Accessing information ubiquitously creates complexity and creates heavy traffic onto the network, especially at large-scale events like sporting events or festivals. In this video, Huawei's Mohammad Hussain speaks to experts about how to predict traffic and improve user experience during periods of heavy traffic.
Upcoming Live Events
June 8, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Network functions virtualization (NFV) is not the easiest of topics to take on board, so here's a Light Reading infographic, developed following conversations with the folks at HP, that helps make sense of where NFV is taking the industry.
Hot Topics
Verizon Saves 60% Swapping Copper for Fiber
Sarah Thomas, Editorial Operations Director, 5/19/2015
Choosing a Technology Supplier? Consider Changing Your Selection Criteria
Steve Saunders, CEO and founder, Light Reading, 5/18/2015
Chattanooga Charts Killer Gigabit Apps
Mari Silbey, Senior Editor, Cable/Video, 5/20/2015
10 Alternate Uses for Tablets
Eryn Leavens, Copy Desk Editor, 5/22/2015
Smarter 'Dumb' TVs Will Drive OTT Adoption
Mari Silbey, Senior Editor, Cable/Video, 5/18/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
With 200 customers in 60 countries, Stockholm-based Net Insight has carved out a solid leadership position in one of the hottest vertical markets going in comms right now: helping service providers and broadcasters deliver video and other multimedia traffic over IP networks. How has Net Insight managed to achieve this success in the face of immense competition from the industry giants?
My ongoing interview tour of the leading minds of the telecom industry recently took me to Richardson, Texas, where I met with Rod Naphan, CTO and SVP, Solutions, ...
I recently popped down to Texas to chat with CEO Eric L. Pratt about his company, Taqua.
Cats with Phones