by Larry Levin
The network giant (CSCO 20.13, -1.91, -8.67%) reported better-than-expected results for the second fiscal quarter on Wednesday, and issued a relatively positive forecast. But the stock slumped more than 8% after hours, after company executives said on the conference call that its switching revenue was down 7% for the period. See Cisco earnings story here.
There was a little more than that involved here.
First, there's no public-sector growth. Revs off there. Routing and switching - the core Internet stuff? Not good, down 7%. And that's the high-margin, high-dollar stuff.
DSO is up a bit too - only two days, but it counts. That's ~5% or so and is not to be ignored.
More important however was in the actual report itself. Revenues were up 6%, but net income was down 17.9% on a GAAP basis, and 11.2% non-GAAP. There's margin compression - again - this time in a name where you would not expect to find it.
Buying back stock, which the company has been doing, is a fool's game if the stock price is sinking. And CSCO is. This is a serious problem as those purchases are basically wasted money when the price declines. That isn't so good.
What's worse is that cost of products rose 20% while sales of products rose 3% over year-ago periods.
That's not a small increase in cost and it is a very small increase in sales!
Sales and marketing were up 15% although general and administrative were well-controlled.
Inventories were up, receivables down, some intangibles written off. Nothing good in there either; everything is going the wrong direction.
Nothing else sticks out at first blush..... but in a word, yuck.
I can see why the immediate reaction was negative.
Pssst.... how about that off-balance sheet vendor financing? How's that stuff doing John?
Cisco reported quarterly earnings after the bell Wednesday. It was good.
Although Cisco shares have been pretty bad to shareholders, they haven’t hurt CEO John Chambers’ pocketbook.
Here are a few recent stock transactions for John Chambers.
Yes sir, Cisco has been VERY good to John Chambers in 2010.
Karl Denninger at the Market-Ticker has a good write up over Cisco.
Click here to read the whole article:
Although Cisco shares have been pretty bad to shareholders, they haven’t hurt CEO John Chambers’ pocketbook.
Here are a few recent stock transactions for John Chambers.
- Sep 16, 2010 285,000 Acquisition (Non Open Market) at $0 per share.
- Aug 18, 2010 243,178 Automatic Sale at $22.50 per share - $5,471,505
- May 18, 2010 22,273 Automatic Sale at $25 per share $556,825
- May 17, 2010 1,000,000 Option Exercise at $16.01 per share.
- May 17, 2010 1,250,000 Automatic Sale at $24.61 per share - $30,762,500
- Mar 05, 2010 1,800,000 Option Exercise at $16.01 - $20.53 per share.
- Mar 05, 2010 1,800,000 Automatic Sale at $25 per share - $45,000,000
- Feb 08, 2010 2,000,000 Option Exercise at $18.57 per share.
- Feb 08, 2010 2,000,000 Automatic Sale at $23.73 per share - $52,206,000
Yes sir, Cisco has been VERY good to John Chambers in 2010.
Karl Denninger at the Market-Ticker has a good write up over Cisco.
Click here to read the whole article:
The network giant (CSCO 20.13, -1.91, -8.67%) reported better-than-expected results for the second fiscal quarter on Wednesday, and issued a relatively positive forecast. But the stock slumped more than 8% after hours, after company executives said on the conference call that its switching revenue was down 7% for the period. See Cisco earnings story here.
There was a little more than that involved here.
First, there's no public-sector growth. Revs off there. Routing and switching - the core Internet stuff? Not good, down 7%. And that's the high-margin, high-dollar stuff.
DSO is up a bit too - only two days, but it counts. That's ~5% or so and is not to be ignored.
More important however was in the actual report itself. Revenues were up 6%, but net income was down 17.9% on a GAAP basis, and 11.2% non-GAAP. There's margin compression - again - this time in a name where you would not expect to find it.
Buying back stock, which the company has been doing, is a fool's game if the stock price is sinking. And CSCO is. This is a serious problem as those purchases are basically wasted money when the price declines. That isn't so good.
What's worse is that cost of products rose 20% while sales of products rose 3% over year-ago periods.
That's not a small increase in cost and it is a very small increase in sales!
Sales and marketing were up 15% although general and administrative were well-controlled.
Inventories were up, receivables down, some intangibles written off. Nothing good in there either; everything is going the wrong direction.
Nothing else sticks out at first blush..... but in a word, yuck.
I can see why the immediate reaction was negative.
Pssst.... how about that off-balance sheet vendor financing? How's that stuff doing John?
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