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Optical/IP

Cisco Stock Falls on CFO Rumors

Shares of Cisco Systems Inc. (Nasdaq: CSCO) fell more than 7 percent in heavy trading today, apparently on rumors that the company’s CFO Larry Carter may leave without certifying the company’s fourth-quarter financial results.

Carter, who's been CFO since 1995 and has overseen the company's growth from $1.2 billion to $22 billion in annual revenues, has been said to be looking to leave Cisco for some time. But the timing of his departure seems to be what spooked investors today.

Some have whispered that Carter won't be around to sign off on the sworn statement that Cisco, along with 946 other public companies, is now required to submit to the Securities and Exchange Commission (SEC) (see Optical Companies Challenged by SEC). There's even been speculation that CEO John Chambers may not sign off on the financials either.

CFOs and CEOs are required to sign separate statements, according to the SEC ruling.

Cisco ended its quarter on July 27th and will report its financial earnings on August 6th. The deadline for filing the sworn SEC statements for most companies is August 14th, but Cisco says its statement won't need to be filed until later, since -- like some other vendors in the sector, such as ADC Telecommunications Inc. (Nasdaq: ADCT) -- it reports its earnings on a fiscal calendar that's later than that of other companies. Presumably, Cisco's official 10-Q for the earnings announcement will lag the public presentation.

Cisco would not comment on the rumors regarding Carter's departure, stating, as always, that as a policy the company does not comment on rumors or speculation.

As to the financial certifications, Cisco says it's business as usual. A spokesperson says that in previous quarters, both Carter and Chambers have personally certified the quarterly and yearly results before submitting them to the SEC. So the present SEC order is essentially an extension of normal business practice.

"We can't comment on any rumors, but what I can say is that formalizing this process does not give us any concern," says Robyn Jenkins, a Cisco spokesperson.

Some equity analysts seem confident that Carter’s supposed departure is nothing more than an executive moving on to do other things. In a note published today, Tim Luke of Lehman Brothers wrote: “We would underline that long time CFO Larry Carter has, as far as we know, been looking to move on for some time so the key question has been one of timing. However, we do believe that he is likely to stay around to sign off on the financials.”

Analysts from Credit Suisse First Boston also said earlier today that they are confident management will sign off.

Cisco’s stock was trading at $12.10, down $1.09 (8.26%) late today.

— Marguerite Reardon, Senior Editor, Light Reading
http://www.lightreading.com
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Belzebutt 12/4/2012 | 10:01:12 PM
re: Cisco Stock Falls on CFO Rumors That's how much Cisco's drop today wiped out from investors' pockets. Is the US government prepared to risk billions more by exposing possible fraud in staple companies like Cisco or Microsoft? What really amazes me is that Bush really seems to be doing it, how completely shocking...

LR, you should have a poll asking "do you think Cisco is cooking its books", I'd love to see the results :)
dietaryfiber 12/4/2012 | 10:01:12 PM
re: Cisco Stock Falls on CFO Rumors It seems to me to be even more remarkable will pay the premiums for a company where its growth rate is extremely challenged. From a fundamentals viewpoint, Cisco ought to be around $7 per share.

dietary fiber
jamesbond 12/4/2012 | 10:01:11 PM
re: Cisco Stock Falls on CFO Rumors LR, you should have a poll asking "do you think Cisco is cooking its books", I'd love to see the results:

-------------------------

I think so and so is Sun microsystems.
nyc 12/4/2012 | 10:01:10 PM
re: Cisco Stock Falls on CFO Rumors you people amaze me. I have never seen such jealousness in the industry before. The fact is Cisco is outperforming ever single company in the industry bottom line has improved and beat expectation so far. Top line is slowly increasing in a market where everyone else is decreasing....chambers and carter are the two most hones guys in the industry....Wait until august 6th before you open your mouth and then we will have something to talk about....
wilecoyote 12/4/2012 | 10:01:10 PM
re: Cisco Stock Falls on CFO Rumors Depends on how you define cooking the books. Will the $2B in inventory write downs from last yr that was never disassembled, show up on this qtr's P&L for example? Is the organization CSCO has in Nevada that does derivitives trading to pad earnings another example?

Carter's too smart to get nailed. CSCO finance organization is smarter than the SEC. My bet is, yes the organization is dirty but not dirty enough or dumb enough to get caught like the telecom guys who are all idiots.
aa 12/4/2012 | 10:01:10 PM
re: Cisco Stock Falls on CFO Rumors 8 billion?
But as we all should know by now, this 8b is
just on paper. Dont count on it for your retirement - especially at wildly overvalued companies like Cisco. I wonder where all these smart people were when 8b used to be added to
the market cap for no reason!! Nobody raised
any smart questions then? Its just unwinding all
the excesses of the past 5 years - only that Cisco is lagging in this.
sauron5 12/4/2012 | 10:01:09 PM
re: Cisco Stock Falls on CFO Rumors If they have nothing to hide than an investigation
should turn up nothing. But, how can you always
have the exact amount of revenue necessary to
consistently beat earnings estimates by a penny?
Those familiar with the stock know what I'm
talking about.

Just a thought...

Sauron
lightdimming 12/4/2012 | 10:01:09 PM
re: Cisco Stock Falls on CFO Rumors It could be a disaster for high tech depending on the cooking recipes and ingredients.
kanon 12/4/2012 | 10:01:08 PM
re: Cisco Stock Falls on CFO Rumors Folks:
$.01/share of 7B shares is $70m. In order to come out exactly a penny above Wall Street estimates, Cisco only has to work the numbers in units of $70m. How many individual orders would be $70m in one shot? Besides, thanks to Net 30 payment schedules, there is always scope for recognising a revenue in the next month, etc.
In other words, beating estimates by a penny is a no brainer.
-
Kanon
wilecoyote 12/4/2012 | 10:01:08 PM
re: Cisco Stock Falls on CFO Rumors GE did it too. Under JW, they NEVER missed. Always a penny over, right at, etc. Suggestive sureley God help us if it's conclusive and GE and CSCO are guilty. I mean, everyone in America will throw in the towel on the market...
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