Seeking Alpha

Cisco offers poor guidance, shares tumble

  • Cisco (CSCO) guides on its FQ1 CC for FQ2 revenue to decline 8%-10% Y/Y, and EPS of $0.45-$0.47. That's well below a consensus for a 4.1% revenue increase and EPS of $0.52. The networking giant is also guiding for FY14 (ends July '14) EPS of $1.95-$2.05, below a $2.10 consensus.
  • Orders fell 4% Y/Y in FQ1 after growing 4% in FQ4. The two biggest culprits: Service provider orders fell 13%, and emerging markets orders fell 12% (India and China -18% each). The company isn't currently expecting order improvement in FQ2.
  • Service provider weakness is blamed on soft carrier spending, declining set-top sales (attributed to product shifts and an effort to move away from low-margin deals), core router product transitions, and low-end edge router share loss (likely to Juniper).
  • Also: Cisco estimates the government shutdown impacted FQ1 U.S. federal sales by $50M, and the political environment in China is said to remain "challenging."
  • CSCO now -9.8% AH. Also off: JNPR -2.8%. FNSR -1.3%. More names could sell off in time.
Comments (39)
  • labas112
    , contributor
    Comments (304) | Send Message
     
    It is like free money when CSCO reports. All you need to do is short or buy puts. The company constantly disappoints.
    13 Nov 2013, 05:19 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (778) | Send Message
     
    I was right with you there brother! I will admit that the drop after-hours even surprised me. Chambers puts money in my pocket every three months. Unfortunately, it isn't the way he or CSCO shareholders intend.

     

    CEO John Chambers is an absolute TRAIN WRECK as an organizational leader. How this guy survives dreadful year after year beats me?
    13 Nov 2013, 07:13 PM Reply Like
  • getshorty
    , contributor
    Comments (533) | Send Message
     
    I don't get it. What a failure as a CEO. He just got a huge raise and then went on CNBC today before the earnings call and made it sound like everything is coming up rainbows and unicorns. I was looking at the numbers while he was speaking and saying to myself (and the TV of course) "are you f****** serious?"
    13 Nov 2013, 11:03 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (778) | Send Message
     
    Chambers has always been like that. A couple of years ago I heard one analyst on CNBC refer to him as "Smiling John" because of his "what me worry?" attitude. Personally I think he's been an absolute disaster as a CEO and if I was a board member, he'd have to go. Frankly, Chambers "everything is fine" management style loses a lot of credence when it's followed by one disappointing quarterly report after another. I mean really??? This has been going on for over a decade. Think about that for a second. Ridiculous.
    14 Nov 2013, 06:52 AM Reply Like
  • Ajayyy
    , contributor
    Comments (311) | Send Message
     
    Yah, the report is bad and hardly anything to be positive about. But IMO this is just going to make CSCO more attractive for long-term and short-term traders because 10% fall in way over-done for a company of this size (100B+) and the future is bright for them. I'm buying this Tomorrow (or Friday)
    13 Nov 2013, 05:23 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (778) | Send Message
     
    Ahhh memories... I've been hearing that same type of optimism about CSCO for the last 8 years.

     

    Dead money!
    13 Nov 2013, 07:09 PM Reply Like
  • getshorty
    , contributor
    Comments (533) | Send Message
     
    Future is bright? Can you elaborate? I see nothing but dark clouds on the horizon and a company in a tailspin now, possibly a full blown collapse by this time next year. If you know something I don't, I would love to hear it.
    13 Nov 2013, 11:00 PM Reply Like
  • AT@VA
    , contributor
    Comments (3) | Send Message
     
    I am buying too CSCO below $19.00 JNPR below $17.00
    14 Nov 2013, 05:27 AM Reply Like
  • getshorty
    , contributor
    Comments (533) | Send Message
     
    I don't think 10% is overdone and in fact I think 15-20% is warranted. This a company that is failing operationally and has end markets that are crumbling.
    14 Nov 2013, 12:54 PM Reply Like
  • hannan98
    , contributor
    Comments (146) | Send Message
     
    CSCO has a strong balance sheet and its not going anywhere anytime soon. I am looking to buy it mostly for the dividend stream.
    13 Nov 2013, 05:26 PM Reply Like
  • kevinoreilly111
    , contributor
    Comments (2) | Send Message
     
    Google finance shows yield of 3.2% but it is more like 2.4% and not much history of that. Do you think they will maintain quarterly 0.17 dividends?
    9 Dec 2013, 02:41 PM Reply Like
  • labas112
    , contributor
    Comments (304) | Send Message
     
    I don't disagree, but CSCO is dog. The company cannot break the mid 20's with any consistency and is exactly where it was 10 years ago.
    13 Nov 2013, 05:31 PM Reply Like
  • hannan98
    , contributor
    Comments (146) | Send Message
     
    Lab,

     

    I bought CSCO a few years back at 19 i believe and earlier this year sold it at 21. Of course, after I sold, it went up to 26. Just my luck.

     

    But I think we both have different objectives. I have converted to being a DGI (dividend growth investor). So I am looking for solid companies where I can count on the dividend as the income (when i retire in 35 years, i would like a stream of 60K a year :))

     

    I do not really trade anymore, its really more about quality for me now. Good luck investing!!
    13 Nov 2013, 05:52 PM Reply Like
  • mitrado
    , contributor
    Comments (1948) | Send Message
     
    I did almost the same. Bought at $15 in 2011, collected 3 ridiculous dividends... and sold at $17 in 2012. Then it went up. :-P
    14 Nov 2013, 03:23 AM Reply Like
  • tiger8896
    , contributor
    Comments (577) | Send Message
     
    13% service provider, 18% China and India sales declines? Those are crisis level sales declines, Huawei is eating their lunch in Asia and I'm thinking that it's competitor share gains rather than weak capital spending at the carriers. Horrible if you own CSCO.
    13 Nov 2013, 05:52 PM Reply Like
  • ConservativeOutperformer
    , contributor
    Comments (541) | Send Message
     
    That definitely appears to be the case. Another interesting point to bring up is what response the rest of the world is giving CSCO in light of the Snowden revelations.... If everyone is accusing Huawei of passing information to the chinese government, yet CSCO or someone else is doing the same thing to the american government..... The entire 'trust thesis' with CSCO goes out the door.

     

    I bought way below today's prices, and I do expect CSCO to still provide solid returns going forward, but these numbers are atrocious..........

     

    Good luck!
    13 Nov 2013, 06:10 PM Reply Like
  • WildKiwi
    , contributor
    Comments (80) | Send Message
     
    Bingo
    13 Nov 2013, 06:12 PM Reply Like
  • getshorty
    , contributor
    Comments (533) | Send Message
     
    Catastrophic.
    13 Nov 2013, 11:03 PM Reply Like
  • Hhmiles
    , contributor
    Comments (620) | Send Message
     
    A dog, for sure. Take a look at a 10-year chart of Cisco and ask yourself, 'How is it that the dominant company at the center of the networking revolution, can be such an under-performer?' Chambers should have been axed years ago.
    13 Nov 2013, 05:53 PM Reply Like
  • mitrado
    , contributor
    Comments (1948) | Send Message
     
    A CEOs' monthly paycheck should be limited and never higher than the annual salary of the least paid employee of the company.
    Bonuses should only be paid to CEOs if shares went up. If shares went down, the CEO should pay a fee.
    14 Nov 2013, 03:24 AM Reply Like
  • Ajayyy
    , contributor
    Comments (311) | Send Message
     
    I don't know enough about CSCO's business model but wouldn't the drop in sales this quarter just mean that next quarter is going to be a blowout as everyone catches up on orders? It's not like CSCO is a laggard in product quality and innovation, they stay on top of that. Maybe I'm just a biased long looking for a thesis to fit my bias.
    13 Nov 2013, 06:24 PM Reply Like
  • Archman Investor
    , contributor
    Comments (2351) | Send Message
     
    CSCO is a meaningless company. Same with INTC & MSFT et al.

     

    They are former bull market winners that are irrelevant now. They remain only in the news because the media needs to keep brainwashing people with words like bellwether & most widely held. Couple that with mutual fund managers that have no choice but to own this garbage and keep pumping them to no end even after more than a decade of wasted investment dollars.

     

    I pity those who still invest their money in these companies and remain uneducated as to how the stock market and advertising really work.
    13 Nov 2013, 07:25 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (778) | Send Message
     
    I don't completely disagree. However, I think it's more accurate to portray CSCO and the others as "value" stocks while they still seem to be treated like "growth" stocks by the reporting analysts on CNBC.

     

    Frankly, CSCO, MSFT, or INTC really have nothing to do with growth anymore. While CSCO and MSFT are hampered by two of the worst CEO's in the history of tech, INTC is dragged down by a lack of vision or decisions that were made 10 years ago. In any case, all three can be traded around in a select price range but have little or no real prospects for any meaningful growth in the foreseeable future.
    14 Nov 2013, 07:01 AM Reply Like
  • Island_Dweller
    , contributor
    Comments (359) | Send Message
     
    It's puts an even bigger smile on my face when people such as yourself point at MSFT as irrelevant, yet I'm already smiling since it's been on a tear this year. What's irrelevant is using MSFT and INTC in the same sentence when clearly there's a significant divergence in their SPs as well as earnings growth. I suppose you are one of those "educated" investors who point to declining PC sales and instantly typecast MSFT as a contracting company.

     

    If your pity gives me over 35% in less than a year, I got one question for you: How much you got to spare?
    14 Nov 2013, 07:50 AM Reply Like
  • Archman Investor
    , contributor
    Comments (2351) | Send Message
     
    Island:
    Congrats. That is awesome. I wouldn't get to cocky though. Less than 12 months may be a good "trade" time frame but I would like to talk again say in 10 years, an investment time frame.

     

    We are nearing the tail end of a Federal Reserve bull market which has seen MSFT climb to around $20 below its all time high set in 2000. Like most stocks it is starting to look parabolic.

     

    The fall of most stocks, especially all the over owned and over advertised stocks, will be just as spectacular as in recent memory.

     

    Best to you and your continued success.
    14 Nov 2013, 08:05 AM Reply Like
  • WisPokerGuy
    , contributor
    Comments (778) | Send Message
     
    MSFT, like CSCO has been led by an inept CEO with little business foresight or the ability to make positive acquisitions that would have kept MSFT relevant in the smart phone or tablet era. However, unlike CSCO, MSFT is basically a "cash cow" at the moment with no real meaningful impact on the ever-changing face of technology. Think Hewlett-Packard circa 2009.

     

    I'm happy people have made money on trading MSFT from the mid-$20's up to around the $37 it is today. But that's exactly what I said above - MSFT (and the others) are now trading vehicles who growth days are well behind them (unless something drastically changes). I've held MSFT call options myself over the course of 2013. All is good.

     

    But @Island_Dweller, I say this with all due respect --- using the 35% gain you've had over the course of a year when the S&P 500 is up almost 30% as a sign that ANY company will continue to do well into the future, is frankly, just plain silly and pretty naive investor analysis.

     

    Let's just leave it at that.
    14 Nov 2013, 11:00 AM Reply Like
  • Island_Dweller
    , contributor
    Comments (359) | Send Message
     
    "no meaningful impact on the ever-changing face of technology"
    So MSFT isn't a sexy AAPL, or a dominant GOOG, but to consider it a nonfactor when its businesses are growing (save Windows obviously), some by a large amount (Azure), is well "frankly, just plain silly."

     

    Profit is profit. Stocks don't always trade on technicals and investor analysis. MSFT maybe not be a growth investor's pick, but it's no longer dead money. That's a fact and that's what matters.
    14 Nov 2013, 05:24 PM Reply Like
  • mitrado
    , contributor
    Comments (1948) | Send Message
     
    $MSFT will almost certainly post a loss in 2014 and 2015. I won't touch that stock before they swing to profitability again.
    15 Nov 2013, 05:26 AM Reply Like
  • tawse57
    , contributor
    Comments (716) | Send Message
     
    Would not surprise me to see CSCO at 16 bucks again within a few months.

     

    Huawei is making huge inroads into Europe and UK markets.
    13 Nov 2013, 07:34 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (778) | Send Message
     
    I've ripped CSCO and John Chambers in several comments above. However, let me say this, if CSCO hits $16 a share, the call options begin to get pretty interesting again.
    14 Nov 2013, 11:03 AM Reply Like
  • sunnypt
    , contributor
    Comments (120) | Send Message
     
    I'm long at 18 avg purchase and supplement the dividend income with selling calls when price goes up and buying them back when price goes down. I sold Jan 2014 $23 calls in May for $2.12 a share. Tomorrow who knows how cheap I will buy them back. I'm staying long CSCO.
    13 Nov 2013, 07:40 PM Reply Like
  • Deja Vu
    , contributor
    Comments (1153) | Send Message
     
    circling the drain...

     

    CSCO, HP, YHOO,

     

    Will circle the drain in 2-3 years

     

    ORCL MSFT
    13 Nov 2013, 07:51 PM Reply Like
  • riotango07
    , contributor
    Comments (66) | Send Message
     
    Don't forget Intel! Now thats a Dog!
    13 Nov 2013, 08:08 PM Reply Like
  • WulfherSS
    , contributor
    Comments (181) | Send Message
     
    Scam by CSCO to reduce share price for buyback. CSCO is a buy.
    13 Nov 2013, 08:29 PM Reply Like
  • alxacid
    , contributor
    Comments (10) | Send Message
     
    Profitable call/put spread; thank you CSCO for never failing to disappoint on earnings.
    13 Nov 2013, 09:09 PM Reply Like
  • getshorty
    , contributor
    Comments (533) | Send Message
     
    Do you mean "thank you CSCO for never failing to disappoint on earnings by always disappointing on earnings?"
    13 Nov 2013, 11:04 PM Reply Like
  • alxacid
    , contributor
    Comments (10) | Send Message
     
    Yes, I feel like people should know that the investment banks and mutual funds will lead the sell off and can use this to their advantage to sell options and buy on the cheap. $21 looks like a fair price at the moment and with the cyclical run up into earnings with steep sell off there seems like there is good money to be made with this floundering monstrosity of a company. And if they ever do get their act together, maybe the stock will leave the $20 doldrums...but until then make your money with the dividend and option premium.
    14 Nov 2013, 11:51 AM Reply Like
  • SO Yummy
    , contributor
    Comments (4) | Send Message
     
    CSCO, you suck at this.
    13 Nov 2013, 11:01 PM Reply Like
  • Hhmiles
    , contributor
    Comments (620) | Send Message
     
    On second thought, Cisco's single biggest disappointment is in its board of directors.
    16 Nov 2013, 09:20 AM Reply Like
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