Cisco: Profit, With No Nasty Surprises
Revenues were down from a year ago, but the company continues to show a tidy profit, even as spending is down in most areas in which it works.
As its revenues slowly slide away in tandem with corporate spending overall, analysts remain watchful of Cisco's core businesses. "We believe the biggest issue for Cisco is the growth, or lack of it, of its core products, routers and switches, which make up in excess of 80 percent of revenues when service revenues related to their sales are included," wrote Legg Mason Inc. analyst Timm P. Bechter in a report issued this morning.
That said, routers and switches were 27 percent and 41 percent of Cisco's revenues during the quarter, which was pretty much on a par with its previous quarter's results. Indeed, the pie may be getting smaller, but Cisco doesn't appear to be giving up any of its slice.
For its third quarter of fiscal 2003, Cisco earned (pro forma) $1.1 billion, or 15 cents a share, on revenues of $4.6 billion. Analysts surveyed by Multex.com Inc. expected Cisco to earn 14 cents a share on revenues of $4.6 billion, so Cisco's report was slightly better than expected. But its results were still down from the year-ago quarter, when it earned 11 cents a share on revenues of $4.8 billion.
Using the real numbers -- generally accepted accounting principles (GAAP) -- Cisco's net profit for the quarter was $987 million, or 14 cents a share, compared to its year-ago quarterly profit of $729 million, or 10 cents a share. Over a longer stretch, though, Cisco's numbers in fiscal 2003 look even better. Its profits for the first nine months of fiscal 2003, on a GAAP basis, were $2.6 billion (36 cents a share), compared to profits of $1.1 billion (15 cents a share) for the first nine months of fiscal 2002.
During the quarter Cisco overcame two months of lower-than-expected sales to end the quarter on a high (see Sources: Cisco's Sales Light). However, company executives cautioned that April's strong bookings don't necessarily mean a thing for the rest of the year.
The company ended the quarter with $20.3 billion in cash, cash equivalents, and investments. Cisco also bought back $2 billion of its shares, bringing its nine-month tally of share repurchases to $4.5 billion.
But as tight a ship as Cisco is running, it is just as susceptible to a messed up economy as any other company. After nearly a three-minute buildup, exhausting just about every buzzword in the English language, Cisco CEO John Chambers finally revealed that Cisco expects its revenues to be flat for its fourth fiscal quarter of 2003. Chambers noted that he was more optimistic about the factors Cisco can control, but more "cautiously optimistic" about "external factors."
During the quarter, Cisco acquired two companies (see Cisco Buying Linksys for $500M and Cisco Snatches SignalWorks); overcame a couple of months of weak sales (see Cisco Reseller Throws Cold Water); and continued to make its case for not expensing stock options, which it feels will lead to job losses to other, primarily Asian, countries and reduced employee ownership (see Chambers Attacks Accounting Plans).
Speaking of job loss, Cisco continued to shed staff during the quarter as well, as its headcount dropped 486 to about 34,501 employees.
— Phil Harvey, Senior Editor, Light Reading