Cisco reported after the close yesterday. Though earnings were up 34%, guidance was not to Wall Street's liking.
Did Cisco guide downward for the next quarter? No, not really. They reduced the lower limit of expected revenue.
Did they say growth would be poor across the board? No, they said large corporate customers in the US were showing sluggish demand and that growth in that segment would be reduced from 20% to mid-single digits. That sounds bad until you realize that's only about 13% of Cisco's business.
Sales to large enterprise customers in international markets is still expected to grow strongly and in consumer markets, growth has been in double digits and is expected to continue at that rate. Cisco now gets more than half of it's sales outside the US and thus is less dependent on the domestic market.
So should we rush to sell Cisco shares after today's gap down? They were down 6.5% today and will probably weaken further over the course of the next week or two. Nevertheless, this downturn has been overdone. The share price will recover. As I said in the post where I first recommended Cisco, the wind is at their backs. They are in a fundamentally good position with good growth expected in most of the markets they serve. They will remain a solid part of our portfolio.
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