Skip to main content

Cisco - Earnings Commentary

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.
Labels:

Comments

Anonymous said…
My view is contrary to yours. CSCO is facing a tough competition in its traditional networking products from players like Huawei. Huawei offers same products at prices that are two-third lower. Huawei is gaining more market shares from CSCO, particularly in the Asian region. I think CSCO need to reinvent itself for future growth.
May 10, 2007 at 5:23:00 PM EDT
TradeRadarOperator said…
I agree that CSCO is facing tough competition but they have proved to be pretty good at reinventing themselves over the last few years. They have developed a large consumer business segment via acquisitions of Scientific-Atlanta and Linksys. Their latest acquisition, Web-Ex, shows they are now moving into online collaboration. I think CSCO will do OK.
May 10, 2007 at 5:41:00 PM EDT

Post a Comment

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation
4 comments
Read more

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professional
20 comments
Read more

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what
10 comments
Read more