Research archive for CSCO

Another company changing their ways is Cisco. Although, judging by the muted reaction in the stock price, it seems the market is not too impressed. The announcement came yesterday, pre market: Cisco Board Names Chuck Robbins as Next CEO. More importantly, John Chambers is on his way out as CEO, he does however stay on as Executive Chairman. Sigh. The man should go, that is the opinion of us here at Vestact, although in fairness to Mr. Chambers, Bill Gates had only good words to say about him yesterday. Gates was flanked by Charlie Munger and Warren Buffett in a CNBC exclusive, post the Berkshire AGM. So then I said, well what do we know if Gates gives him that sort of endorsement?

Last week we received results from Cisco for the first quarter of their financial year. It was the best Q1 of their history with revenues of $12.2bn which saw an increase of just 1%. Non-GAAP earnings came in at 54c per share which beat consensus by 1c. Earnings estimates for the full year are expected to come in at $2.13. Trading at $26.47 the stock affords a forward multiple of 12.4. Not expensive by any stretch of the imagination. The company also sits on cash and cash equivalents of $52bn (nearly 40% of its market cap) and has bought back $1bn worth of stock in the quarter with a remaining $7.5bn still to come.

Wednesday evening we had Cisco release their 3Q results, which were a beat on the streets expectations. The beat resulted in an increase of 6% in their share price yesterday. So here are the numbers, revenue of $11.55 billion, down 5.5% but better than the expectations of $11.3 billion and even better than their own guidance of a drop between 6-8%. Margins were better than expected as well, with gross margins sitting at 62.7% compared to expectations of 61.3%. EPS is down to 42c a share from 46c the same time last year.

Last night we received quarterly results from Cisco which again looked fairly muted but above analyst expectations. Revenues were down 7.8% to $11.8bn. Net income for the period was down 54.5% but that was because there were a few once off charges. From continuing operations Non-GAAP net income came in at $2.5bn which was down 7.4% from this quarter last year. This equated to 47c per share. The image below pretty much summarises where and how this business makes money.

Cisco results after hours yesterday. The disco ball came crashing down. That John Chambers (the CEO and Chairman), it is time for him to go. CEO since 1995, chairman since 2006. Or not, I know that there have been loads of people calling for his head, he certainly has been around Cisco for an absolute age and I would guess knows the hardware market better than many. Chambers is 64, he has just turned 64 in August, he looks healthy and I would think still has many ambitious plans in this exciting phase of the company. So I guess his days are numbered as CEO, perhaps as Chairman he will be around for a while. Turned out pretty good for a guy who was diagnosed with dyslexia!

As promised, Sasha covered the Cisco results from last week. Cisco had numbers on Wednesday evening our time, after the market. The overreaction Thursday in the trading session was that the stock sank 7.17 percent, sold off heavily after a 30 odd percent gain for the year, prior to the session collapse. It always amazes me how ruthless the Americans are, if you miss, you are punished. Equally if you beat, the heat is on!! Back in the middle of May, when Cisco reported, the stock ramped up over ten percent. Why the sell-off, what could it really be attributed to?

Cisco rallied like crazy yesterday, the stock added 12.6 percent on the day. Remarkable really, to add shy of 15 billion Dollars worth of value in a single day, but the results in the prior session were that good. They really were. We have been really patient on this one, and it seemed for a while that there were several shareholders starting to lose the faith. Losing the faith with John Chambers (CEO and chairman), losing the faith with margins slipping and most importantly losing the faith the structure and product development. George Michael would say that you have to have faith. And hope. But, according to Red (Morgan Freeman in Shawshank redemption) in that movie: "Let me tell you something my friend. Hope is a dangerous thing. Hope can drive a man insane."

"Cisco delivered record earnings per share this quarter and record revenue for the 8th quarter in a row in a challenging economic environment. We continue to drive the innovation, quality and leadership our customers expect, and we remain focused on consistent returns to our shareholders, said John Chambers," Cisco chairman and chief executive officer.

It was that time again, the Cisco disco. The company released results for the first quarter of their financial year, and judging by what the stock is doing afterhours, let us just say that the market enjoyed them. A lot of people struggle to understand this company, I figured that I was always going to do a worse job than Google finance in trying to describe the company, so here is a copy paste, right up the alley of a former police chief here locally. You know, the fellow that had a remarkable resemblance to Morgan Freeman.

Another one in our stable of preferred companies, Cisco released results after the bell last evening. The Cisco disco ball really spun this time, and the dancing investors lit up the dance floor with their crazy moves, sending the stock in the post market up nearly five and a half percent! Excellent, it is about time, shareholders have been getting tired of John Chambers in that Forrest Gump voice of his make excuses. I have seen several publications suggesting that the expensive structures at Cisco are not exactly delivering the kind of return that shareholders would have expected from the kings of routing and switching. The main reason for owning the company is that with the increase in quality of the consumer hardware, both at a retail and business level, and with bandwidth speeds continuing to improve the speed and reliability of the network, the "facilitators" of the internet traffic should benefit enormously.

It's amazing to see how investors interpret results releases. Especially when it comes to management commentary. You get the feeling that the traders sus out the general consensus as quick as possible and then everyone follows like sheep, trying to eke out those tiny basis point gains. Seeing that more than 50% of the US market is traded by machines, once the traders push a stock down the momentum gathers and the stock stands no chance. This can happen both ways, pushing the stock up or crushing it. Unfortunately Cisco has experienced the latter after they released quarterly results which actually looked pretty good. The stock is down 8.8% post the market.

Well, sometimes you just have to be patient. This time last year, Cisco announced a big restructuring plan, and if you remember right, everyone got their knickers in a knot over margins falling. The company, their management and the stock price all felt the heat, and times were tough over at Cisco. And friends were few, you know how the saying goes. The stock price slid, listen to this wild ride over the last 12 months, exactly a year ago the share price was 22.04 Dollars. Fast forward to August 10 2011, the price was as low as 13.73 Dollars. Whoa!! Last evening the price closed at 20.43, still down over 12 months, but a lot has been done over that time. Amazingly the stock price is up 46.5 percent over six months. But is down 7.35 percent over twelve months.

The Cisco disco finally has a full dance floor. After hours the stock rose after reporting numbers that topped analysts' forecasts. Which is about all that matters, regardless, it seems. So after hearing a few quarters of commentary which suggested that John Chambers was not getting it, he should go, he was doing a poor job, execution was not there. I kid you not, these are the types of headlines that we are reading now: Cisco Shares Climb After Chambers Turnaround Plan Boosts Profit. I see, so it took more than 10 days. Hyperactive people, calm down, these things take time.

The Cisco disco actually happened after hours, after the US markets had been crushed. An earnings beat and I could hear the collective sigh of relief. Phew. Net sales were three percent higher than the comparable quarter this time last year, gross margins more importantly have stabilized. Costs also seem to have stabilized, as a percentage of revenue. 11.195 billion Dollars worth of sales in Q4 which translated to a bottom line of 2.195 billion Dollars (12 percent lower than this time last year), translating to 40 US cents worth of earnings. Remember included in these results are the whole host of restructuring charges, mostly related to the early retirement program and employee severance packages. For the full year the company made 162 US cents EPS, which was a penny better than last year.

Cisco cutting jobs. A whole lot of jobs in fact, as many as ten thousand jobs, Paul suggested that John Chambers should be on that list. I can assure you that Paul is not alone in wanting to see the back of the Forest Gump sound alike Chambers. That is 14 percent of the workforce, and 7000 will have their pink slips before the end of August. Ouch. Sis. I feel really bad now for those folks. For shareholders of Cisco this will mean that they will save up to one billion USD in 2012, but the immediate costs of all the firing is between half to a full billion Dollars. So it is safe to say that the cost savings will only be felt in 2013. Tell me, the unmeasured, morale of left over staff, how do you measure that? Does it make the existing staff more productive and not wanting to suffer the same fate as their peers? Perhaps. All in all, Cisco have got some serious work to do.