Cisco Tops Expectations

Cisco Systems Inc. (Nasdaq: CSCO) offered investors a glimpse of its former self Tuesday as it reported higher-than-expected profits for its quarterly period ended April 27, 2002 (see Cisco Posts Earnings).

The earnings call, though moderately upbeat, was still absent huge optimistic proclamations about the future. CEO John Chambers instead focused on Cisco's competitive positioning.

"We continue to take market share from our top-ten competitors, with [our] revenue growth of 2 percent year-over-year versus [their] drop of 43 percent percent," says Chambers.

As for the future? "I feel better about going into Q4 [compared to Q3], but not great," says Chambers.

Cisco's sales for 3Q02 were $4.8 billion, compared to $4.7 billion during the year-ago quarter. The company's pro forma earnings, which exclude a plethora of special charges, were $838 million, or 11 cents a share, a significant improvement versus the pro forma net income of $230 million, or 3 cents a share, it reported during 3Q01. Cisco's net income was $729 million, or 10 cents a share. This was much improved over its net loss of $2.7 billion, or 37 cents a share, for the year-ago quarter.

Wall Street expected that Cisco would earn 9 cents a share on $4.8 billion in revenues; Cisco met expectations for the revenue number, and it beat the expectations on pro forma earnings by a penny.

During the quarter Cisco booked $1.44 billion in revenues from routers; $1.92 billion from switches; $240 million from access gear; $384 million from optical gear, IP phones, and other assorted products; and $816 million from services. One of the concerns Chambers mentioned on the investor conference call was a "major decrease in optical business during this quarter."

Cisco's gross margins were 63.1 percent, and it turned inventory 7.5 times during the quarter.

Though there hasn't been an announced layoff, Cisco's headcount has dropped by 851 people in just three months. Cisco now employs 35,935 people, compared to the 36,786 it employed in late February -- the last time it denied that it would lay anyone off (see Cisco CFO: More Cuts Needed).

"We have spent the last sixteen months positioning Cisco for an inevitable upturn in the economy," Chambers said in the conference call. He did, however, stop short of declaring that the telecom recession is over.

Cisco CFO Larry Carter says that Cisco's revenues for 4Q02 will be "flat to up slightly, meaning very low single-digit growth."

In after-hours trading on Island, Cisco gained $1.67 (12.77%) to $14.75 on the news.

— Phil Harvey, Senior Editor, Light Reading
PhotonGolf 12/4/2012 | 10:27:10 PM
re: Cisco Tops Expectations
History shows that the best time to jump back in after a bear market is the quarter where the earnings are the worst. I think lots of people are playing that game. Of course, no one can tell if this is it!

- P
dwdm2 12/4/2012 | 10:27:10 PM
re: Cisco Tops Expectations Have we seen the true bottom? The stocks are higher today in general. Here is an excerpt : "Technology stocks surged Wednesday as upbeat earnings news from bellwether Cisco Systems gave investors the excuse they needed to hunt for bargains amid the beleaguered tech sector." from nasdaq story


BobbyMax 12/4/2012 | 10:27:07 PM
re: Cisco Tops Expectations Cisco does not meet shareholders expectations. Millions of people have lost money because of the sharp decline of the Cisco stock prices.

The company keeps changing its business focus from optical networking to storage systems. There are about 70 start-ups in the storage businees. It is very hard to conceive that this would succeed in this business.

A lot of seasoned executives have left Cisco and the company has promoted executives with lesser experience.

Cisco stock prices are going to rise because of the optimism expressed by Cisco. This tactics is not likely to work.

The headcount is still very high. It still has to show that it can surive on its own without acquiring hundreds of companies.
cisco_deepthroat_speaks 12/4/2012 | 10:27:02 PM
re: Cisco Tops Expectations bulls are making a push, but what's behind it once the cisco news passes? who's going to support this rally next? the bears likely will have more economic data as well as more political issues (terrorism) to once again get the upper hand and bring the markets back down. let alone, the worries of higher interest rates should start in a month or two.
AAL6 12/4/2012 | 10:27:01 PM
re: Cisco Tops Expectations I would disagree with "A lot of seasoned executives have left Cisco and the company has promoted executives with lesser experience" - most of those executives were "good" in extremely good times and used their minions to push hard on engineers who willingly slaved their lives (greed had a lot to do with it too). Some of them came from acquired start-up and had lost their compass in the big company, some were there from the begining but had no clue what to do when the bad times came (remember KJK and his likes?).
Now is the time when company needs people who will stand on the deck and help weather the storm. Those are mostly "less experienced" managers whis are still there as their stock options are worth nothing and their only chance (greed again) is to help the company to become (really) profitable again. Others have left the building last year.
netgenius 12/4/2012 | 10:26:54 PM
re: Cisco Tops Expectations What are the "plethora of special charges" that are not talked about here? Maybe there is a real story under the "plethora" of wishy washy wording.

(http://www.sec.gov/investor/pu... ).
xoip 12/4/2012 | 10:26:51 PM
re: Cisco Tops Expectations This must be good for Pluris, Procket and Caspian-particularly for ones who just had a RIF.
deepciscothroat 12/4/2012 | 10:26:44 PM
re: Cisco Tops Expectations 1. Management team are all now Mario cronies or GMs that go home at 5
2. No new growth markets
3. Losses to carriers still not on books. What about the lending bloodbath at Sigma Networks
4. Low-end enterprise is going to Dell and Netgear
5. No successor to Chamber
6. Big losses in Cable sector and nothing happening in Wireless
7 EPS is toast at 8BN share float
8. All of the BD shop invested personally and made money at the start-ups Cisco acquired...their Enron story is still to come out
9. Chambers will have to pay off the class action suits for the 30%-50% guidance he was giving until a quarter ago
10. Morale sucks

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