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Cisco Q3 Keeps the Beat

Light Reading
News Analysis
Light Reading
5/10/2005
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Cisco Systems Inc. (Nasdaq: CSCO) is still on the mark for its fiscal 2005 growth targets, as its third-quarter earnings report showed no major surprises.

For its third quarter, which ended April 30, Cisco reported net income of $1.4 billion, or 21 cents per share, on revenues of $6.19 billion, compared with net income of $1.4 billion, or 22 cents per share, on revenues of $6.06 billion in the previous quarter. The figures beat out analysts' consensus estimate of $6.15 billion revenues, according to Reuters Research (see Cisco Reports Q3).

For its third quarter a year ago, Cisco reported net income of $1.2 billion, 17 cents per share, on revenues of $5.6 billion.

Pro forma earnings per share were 23 cents, beating analyst expectations of 22 cents as reported by Reuters Research.

Revenues were on par with the mild growth Cisco had predicted for the quarter. The same was true for Chambers's fourth-quarter forecast of revenues "sequentially up approximately 4 to 7 percent."

That would put Cisco at $24.6 billion to $24.8 billion in revenues for fiscal 2005, or 12 to 13 percent growth versus fiscal 2004, right where Chambers has been saying the numbers will fall (see Cisco's Q3 Looking Plain).

The percentages translate into fourth-quarter revenues between $6.44 billion and $6.62 billion, putting analysts's predictions of $6.47 billion revenues on the low side.

Orders for routers grew in the "low double digits" overall, possibly triggering some market share gains, Chambers said. "Our best estimates would be that we could gain one to three points of market share in all three categories," those being core routing, edge routing, and broadband aggregation, he said.

If there was one disappointment, it was advanced technologies -- the collective of wireless, security, IP telephony, storage area networking, optical, and home networking -- which represented just 18 percent of revenues, down about 2 percent from the previous quarter. Chambers said this was "not surprising" given the strong growth the advanced technologies group enjoyed in the January quarter.

Still, the IP telephony group "blew past" the $1 billion run rate, joining security in the billion-dollar club, Chambers said. Orders in storage networking cooled down, to "mid-single digits" sequentially, but that was after a 40 percent boom in the second quarter. Orders in wireless grew double digits sequentially and in the "high teens" compared with last year's third quarter.

Keeping in terms with the unsurprising results, Cisco's stock barely moved after-hours, at press time trading up 9 cents (0.5%) at $18.30.

— Craig Matsumoto, Senior Editor, Light Reading

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signmeup
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signmeup,
User Rank: Light Beer
12/5/2012 | 3:15:42 AM
re: Cisco Q3 Keeps the Beat
"Keeping in terms with the unsurprising results, Cisco's stock barely moved after-hours, at press time trading up 9 cents (0.5%) at $18.30."

Since when has Cisco's stock seen any real movement, even in light of amazing results (i.e. last quarter)? It just doesn't seem to matter that they continue to execute when their competitors stumble and fall to the wayside.

Only interesting news I got out of the call was that Cisco plans on expensing stock options beginning Q1 FY06. That should really help the stock price....
dwdm
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dwdm,
User Rank: Light Beer
12/5/2012 | 3:15:41 AM
re: Cisco Q3 Keeps the Beat
The Cisco stock still looks pretty boring, however the numbers they are reporting are very impressive. As in, it is impressive how they can keep beating the street for so long.

Chambers once said that he wants Cisco to be predictable from an earnings perspective. I think he achieved exactly that. Although I think he assumed that investors would want to dump money in a predictable company.. but that hasn't happened yet.

I own some Cisco stock... so I want some stock growth damn it! :-)
rickaty
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rickaty,
User Rank: Light Beer
12/5/2012 | 3:15:37 AM
re: Cisco Q3 Keeps the Beat
So how bad is optical at Cisco ?

Exhibit A:

From your article:

"If there was one disappointment, it was advanced technologies -- the collective of wireless, security, IP telephony, storage area networking, optical, and home networking -- which represented just 18 percent of revenues, down about 2 percent from the previous quarter. "

The article goes on to say wireless, security, IP telephony and storage area all up, some significantly, yet overall revenues were down 2% in this area. Conclusion - Outside of home networking, Optical dragged down the whole advanced technologies leading to a 2% overall decline ? How bad is optical doing year-over-year to manage that ? Some of those sectors are billion dollar revenue generators.

Exhibit B:

From an AP article on Cisco ernings
"Chambers said the key to the company's success has been technologies such as Internet telephony, storage, wireless and security, and their integration with its traditional businesses of routers and switches that direct data over networks."

So Chambers mentions practically every division of the entire company except optical (and home networking)

So I'm just wondering how bad the optical division is really doing at Cisco ? It appears to be dragging down growth and being singled out by chambers by specifically NOT being discussed. Has it just become a necessary evil ? Or maybe it is becoming an unnecessary evil?
dwdm
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dwdm,
User Rank: Light Beer
12/5/2012 | 3:15:36 AM
re: Cisco Q3 Keeps the Beat
Is there an "optical" company out there that is doing better (that compares to Cisco)? Better in terms of profits and growth? Shouldn't we be guaging their performance vs their peers for a given period of time?

If their peers are showing incremental growth for a period of time, and Cisco is not showing any, then I would say they are doing bad.

When a particular market segment is not growing (and their peers are not growing), I would think the key is profits. Is that optical business unit profitable? or loosing money?

Cisco is famous for re-organizing their business units. If a business unit is not making "enough" money for a period of time, I bet it wouldn't last long....
xbar
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xbar,
User Rank: Light Beer
12/5/2012 | 3:15:32 AM
re: Cisco Q3 Keeps the Beat
>> Is there an "optical" company out there that is doing better (that compares to Cisco)? Better in terms of profits and growth? Shouldn't we be guaging their performance vs their peers for a given period of time?
-------------

Huawei. See BT21C achievement. Their cost structure is killing everybody especially Alcatel.
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