Cisco Makes the Q4 Grade

Cisco Systems Inc. (Nasdaq: CSCO) came through today with some unsurprising earnings numbers and a hint -- but not a conviction -- that business is improving.

Ordering patterns during Cisco's fourth quarter, which ended July 25, looked almost normal, CEO John Chambers said on this afternoon's earnings call. That's in contrast to other recent quarters, where monthly order levels, compared with the same month the previous year, kept worsening. (See Cisco Predicts Q2 Plunge and Cisco's Still Sinking.)

"While it is too early to say that this is a definite trend... the sequential numbers were solid and more in line" with normal business than at any time during the past 12 months, Chambers said.

He added, though, that he wants to wait a couple of quarters before declaring that business has returned to normal. Darn.

Chambers might have good reason to be cautious. Analyst Catharine Trebnick of Avian Securities LLC wrote in a research note yesterday that Cisco's orders were below plan in May, but improved in July to pick up the slack.

Overall, Cisco didn't bring any big surprises with its revenues and earnings as measured by generally accepted accounting principles (GAAP). (See Cisco Reports Q4.)

Table 1: Cisco's Q4
4Q08 4Q09 Change (%)
Revenues ($B) 10.36 8.53 -18%
Net Income ($B) 2.0 1.1 -46%
EPS ($) 0.33 0.19 -42%
Share Price ($) 22.65 22.17 -2%
Source: Cisco
All figures GAAP

(As a side note: In that fourth quarter a year ago, Cisco reported the highest revenues in its history. How's that for a tough comparison?)

Sales were down almost exactly as much as Wall Street expected. But the non-GAAP earnings were 2 cents better than estimates.

Table 2: Cisco vs. Analysts
Analysts' Consensus
Estimate, 4Q09
Actual 4Q09
Revenues ($B) 8.51 8.53
EPS, non-GAAP ($) 0.29 0.31
Net Income, non-GAAP ($B) 1.65 1.83
Source: Cisco, Thomson Reuters

For its first quarter, which ends in October, Cisco is predicting revenues of $8.57 billion to $8.78 billion, or 15 to 17 percent less than the previous year's first quarter. That could be taken as good news; analysts polled by Thomson Reuters were expecting first-quarter revenues of $8.59 billion.

Cisco shares traded up 43 cents (1.9%) at $22.60 each in early after-hours trading.

Cisco is still talking about reducing expenses. The company still says it's not doing a major layoff, but minor layoffs continue. The number of jobs cut during the second half of the year will exceed the 1,500 to 2,000 Cisco already announced, Chambers said. (See Cisco: Still No Layoffs, Cisco Awaits the Hammer, and Nortel/Cisco Updates .)

In the Random Fun Facts category, Chambers reported that one enterprise customer has committed to buy $1 million worth of Flip cameras, the doodads Cisco picked up with the acquisition of Pure Digital. (See Cisco's Latest Buy: Flippin' Sweet.)

— Craig Matsumoto, West Coast Editor, Light Reading

Honestly 12/5/2012 | 3:59:11 PM
re: Cisco Makes the Q4 Grade

These numbers are in line, but frankly, I think CSCO's growth days are so behind it.  With broad and elected competition from and against its former partners and its lack of competitive service and consultant business CSCO is still a reliable bell weather, but hardly a dynamic juggernaut.  IBM, Google are juggernaut's.

Chambers has done a great job for nearly two decades, but growing significant revenue from here while maintaining quality margins, is a long shot to say the least.  IBM, as example is just amazing, but good luck to CSCO.  They will provide us with pulse as Juniper, Brocade go after marketshare and as they, CSCO try to figure out how to grow further.


Perhaps its time to merge with Accenture

Honestly 12/5/2012 | 3:59:10 PM
re: Cisco Makes the Q4 Grade

Well, thanks for sharing some of my best posts.  Frankly, we can agree that we both have strong conviction.  There is a difference, however.  You think CSCO's best days are ahead for your portfolio.  I suggest you look at historical data.  If you have patience you can trade CSCO over a three year cycle period and do quite well, but you better know when to sell.  I on the other hand last owned CSCO in 2006 and also did fairly well.  Of course, the company I owned stock in was bought by CSCO when CSCO was at $15 per share.  When you compare the CSCO of the mid to late 90's, "the growth Cisco" to Cisco of today you cannot compare the opportunity, and no your portfolio will never see that growth CSCO again.

Again, I credit Chambers for building a fine company, However I strongly feel that John sells too much snake oil, albeit very well.  CSCO has built so much value by being a great marketing company, hats off.  CSCO also has incredible account control.  I always get tired of hearing that CSCO is the self proclaimed industry standard and the best, they just are not that technically good.  Geez, Juniper could, should take marketing lessons from CSCO, but if you want to make money you can do better than CSCO.  Take your position, but I assume you own other names.?  I assume you are aware that in the past 52 weeks IBM has traded from the $60 range to $130 in the a 1929 like market.  I call that a company that consistantly delivers growth numbers.  Yes I own IBM.  I also profited on WAN optimization companies that recently doubled from their March lows (many others).  Lots of opportunities.  I respect CSCO, just do not like them, or the swagger, never have, never will.  You tell me how they will maintain margins in years to come.?  Good luck, and keep reading my posts


netapolooza 12/5/2012 | 3:59:10 PM
re: Cisco Makes the Q4 Grade

I do read and enjoy your posts; I especially liked the ones in the past where you opined how well Juniper was positioned to assume the incumbency from Avici for the core in AT&T's Common Backbone.  At the time those predictions were being made, the CRS had already been selected and was in deployment (though not then publicly aknowledged).

You remind me of me, to some degree, in that I have an irrational dislike for Microsoft as a company and cannot bring myself to say that they have any good products.  If you do not believe that Cisco has any good technical merits (you seem to be especially fond of bashing the CRS), then welcome to my irrational world.

Disclaimer: I still have a long position in CSCO and am willing to wait 10+ years before selling.


netapolooza 12/5/2012 | 3:59:10 PM
re: Cisco Makes the Q4 Grade

Honestly posting a negative Cisco comment?  That is so unlike him to say Cisco's best days are behind it,... unless anyone clicks on his profile and strolls down memory lane:


Comment: CSCO's Head Is In The Clouds - Honestly July 1, 2009

Comment: CSCO's NEW Bla Bla Bla - Honestly March 16, 2009

Comment: Cisco Buys The IPTV Test - Honestly June 14, 2007

Comment: CRS - not quite so hot - Honestly September 5, 2006


Those just being the obvious ones based on subject.  Disclaimer: I have a long position in CSCO; my portfolio is counting on its best days being ahead.

Honestly 12/5/2012 | 3:59:09 PM
re: Cisco Makes the Q4 Grade

Ok, we now agree on two points, Microsoft products suck too.  As a user, I did have a Cisco T1 router in my office.  My carrier pulled it out and replaced it because they had too many code problems with their CSCO's.  Ah, memories of that IOS junk.

As for CRS, how many global core carrier networks use CRS?, how many use Juniper?. 


You cannot tell me how CSCO will maintain margins moving forward, but you are prepared to hold your CSCO stock a decade.?  Silly, how many years have you worked for CSCO.?

netapolooza 12/5/2012 | 3:59:08 PM
re: Cisco Makes the Q4 Grade

It hasn't been 10 years yet.  It's OK for you to reply to this in order to get in the last word.


netapolooza 12/5/2012 | 3:59:08 PM
re: Cisco Makes the Q4 Grade

Just as I thought: irrational.  You cannot bring yourself to acknowledge any technical merit of any Cisco product.  To believe that all their products suck indicates either you have a significant financial or emotional interest at stake.  Did you get turned down for a job there in the past?  Did one of their sales reps insult you 15 years ago?  Did your employer pick a Cisco product over what you recommended and you've been carrying a grudge since then?   

On my willingness to go really long on CSCO, should I take Honestly's advice, or Warren Buffet's?  From Yahoo:

<div class="content">"Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years." Warren Buffett

"Our favorite holding period is forever." Warren Buffett</div>
<div class="content">I'll check back with you in 10 years and we can compare notes on whether I would have been wiser to have sold all my CSCO and put it into JNPR.</div>
Honestly 12/5/2012 | 3:59:08 PM
re: Cisco Makes the Q4 Grade

Well, CISCO's set top boxes work well, oh, that's right, that is really Scientic Atlantic technology. &nbsp;Actually, I really like the Flip HD video camera too. &nbsp;CSCO WLAN gear is also a+. &nbsp;None of this technology is organic though.

As for Buffett, I assume you know that his portfolio sold down about 30% after he took very large stakes in bell weather names DOW: Pre March low. &nbsp;I waited to buy and my portfolio is up 110% since March, but you hold your CSCO and stick with dated Buffett sayings. &nbsp;Those saying will make you a lot of money.

marlin_brando 12/5/2012 | 3:59:02 PM
re: Cisco Makes the Q4 Grade

Hey All,


&nbsp;&nbsp; Are everyone waiting for CSCO' down fall ?. I am not, CSCO is still a p'ful bull.

Another fall has come but not CSCO'.


TIPs : Hold the stocks until sunny days.

Wan Li

&nbsp;&nbsp; [email protected]

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