Cisco Beats Estimates
Wall Street analysts only expected Cisco to earn 2 cents a share on a pro forma basis on $4.2 billion in revenues. Cisco's first-quarter revenues also were within its previously stated guidance of between $4.09 billion and $4.3 billion in revenues.
Including the special charges, the company reported a net loss of $268 million, or 4 cents a share, for its first fiscal quarter of 2002, thanks to a prolonged economic slowdown. Cisco's actual results for the quarter were lower than the net profit of $798 million, or 11 cents a share, that it reported during the same quarter last year.
Cisco's net sales rose 3 percent sequentially from the $4.3 billion in net sales that it reported for the fourth quarter of fiscal 2001. The company, however, reported pro forma earnings of 18 cents a share on revenues of $6.5 billion during the same period last year.
All and all, the numbers were better than Wall Street expected, and they appeared to leave a positive impression. In trading after-hours on the Island ECN Cisco's stock rose almost a dollar to 18.78. In trading on Monday before earnings were announced, Cisco had risen 0.64 (3.71%) to 17.90.
In late September, Cisco skeptics incorrectly guessed that the company's revenue numbers for the quarter might fall as low as $3.9 billion (see Cisco: Tough Quarter in Progress).
Cisco's CEO John Chambers says he thinks the company's revenues for its second fiscal quarter of 2002 will be "flat to up slightly, or showing low single-digit sequential growth."
The company's headcount at the end of the quarter was at 37,546. Cisco employed approximately 36,000 people at this time last year and some 38,000 people as of July 2001.
Cisco's operating expenses dropped 5 percent, or $105 million, during the quarter, according to CFO Larry Carter. The company reported having $19.1 billion in cash and other investments, and it repurchased $350 million of its stock during the quarter.
Carter says 36 percent of Cisco's revenues came from router sales, 45 percent from sales of switches, and 11 percent from "optical equipment, software, and other miscellaneous products."
Among the product segments showing the best sequential growth are Cisco's enterprise voice and video products, Chambers says. He says the products showing the worst sequential growth include Cisco's optical transport gear.
Cisco's service provider business in Europe continues to be "very challenging," Chambers says, noting that it was "off in double digits."
Chambers says the challenges Cisco faces in the service provider market are no different than those it overcame in the enterprise market years ago, and he still thinks Cisco can be the number one equipment provider in that market. "We actually view the current slowdown in the service provider market to play to our long-term advantage... While we clearly understand that in many people's view this is a stretch goal, we usually achieve our stretch goals."
Chambers predicts continuing consolidation in the service provider market worldwide and says having fewer select vendors in the service provider network "plays well to [Cisco's] advantage." He says Cisco is expecting a "modest share gain" in high-end routers for the quarter, once industry analyst numbers are available.
The September 11 attacks on America caused a "modest disruption in orders" for Cisco, according to Chambers. He says his discussions with business leaders show that there is "still no consensus as to how long the economic downturn will last."
— Phil Harvey, Senior Editor, Light Reading