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More on Cisco's call: Commentary is downbeat, with Cisco noting weak Euro and public sector...

More on Cisco's call: Commentary is downbeat, with Cisco noting weak Euro and public sector spending. Service provider orders +5% Y/Y, but enterprise orders -1%. Longer sales cycles and smaller deal sizes are being seen. FQ3 switch sales +5%, but router and collaboration (VoIP, telepresence, etc.) sales were flat. Asia-Pac is an area of strength, but China orders -8% Y/Y. Wireless and servers are growing quickly, but are still only 6% of sales. CSCO -9.2% AH. (more) (webcast)

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Comments (10)
  • bbro
    , contributor
    Comments (10309) | Send Message
     
    Public sector spending...don't count on it...
    9 May 2012, 05:17 PM Reply Like
  • Cheesehusker
    , contributor
    Comments (315) | Send Message
     
    long past time to fire Chambers
    9 May 2012, 05:19 PM Reply Like
  • Matt Blecker, CFA
    , contributor
    Comments (172) | Send Message
     
    Thanks Mr. Market for creating another long-term buying opportunity!

     

    Starting buying Cisco this summer at roughly 15 b/c the firm is just so damn cheap given its competitive position, financial health, earnings power, and the increasing demand for internet traffic over the next decade.

     

    The firm guides to slightly lower revenue numbers and the cokehead traders and short-term oriented Wall Street analysts sell off.

     

    Bottom line is this is a firm that will continue to be a leader in routing and switching long-term, will benefit from growth in not only those areas but also other areas of IT, and that is incredibly cheap if you look at the numbers.

     

    The company has GAAP earnings power of at least $1.50 per share, sustainable free cash flow of nearly $10 billion per annum, and net cash of roughly $32 billion or about $6 per share (before repatriation). If the stock opens near 17 tomorrow, you will be able to buy Cisco for roughly 7-8x earnings net of cash!

     

    I would say for a long-term investor the market has sufficiently discounted share dilution, repatriation, competition, management mistakes, etc.....

     

    Yet Amazon goes up 15% after its earnings report when the company still has virtually no earnings and a very slim operating margin.

     

    It is only a matter of time before stocks like Amazon, Linkedin, Chipolte, Whole Foods, etc....come back down to earth, and the market rewards patience long-term investors who buy cheap stocks like Cisco.
    9 May 2012, 05:31 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (989) | Send Message
     
    Although I've owned Cisco in the past, I'm glad I have long since sold (with VERY modest gains). In my opinion, Cisco is a trading vehicle only. There is no growth there and if you look at the chart of CSCO since the tech bubble, it's basically been dead money for over a decade. That speaks volumes, doesn't it? Maybe they do generate cash. Who cares? The share price never goes anywhere and they have basically no dividend. Plus, since late 2010, every quarterly report is like a rerun of bad news. If management couldn't move the share price in good times, how the heck are they going to move it during times of government fiscal restraint?

     

    So Matt, for your sake, I hope you're right. I hope it does pop for you. But in my opinion, CSCO is a DOG company run by one of the most overrated CEO's in business. I echo the sentiment above with a bullhorn --- Fire John Chambers!!! It's already been about 5 years past due.
    10 May 2012, 12:23 AM Reply Like
  • Growtheport
    , contributor
    Comments (275) | Send Message
     
    If you believe in Cisco's turnaround story, this is a buying opportunity. The superficial comments by people who don't understand the business or didn't carefully review the earnings release mean nothing. It owns 60% of the switching and 50% of the router market. A recent study suggests that bandwidth for increased data will soon come at a premium and there will be no other company better positioned to capitalize on that growth than Cisco.
    10 May 2012, 08:35 AM Reply Like
  • azreeal
    , contributor
    Comments (108) | Send Message
     
    Dump it now Matt, big money doesn't read SA comments, it will be down below 17 tomorrow.
    9 May 2012, 07:04 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (989) | Send Message
     
    People have been waiting for Cisco to make its "big move upward" for a long, long time. Over 10 years now. So, the wait continues and people like Matt say "its undervalued". It's a bad company in a bad business (right now) run by a bad management team led by a horrible CEO. Buying stock in a company like that sounds like a Kamikaze mission to me. Pass.
    10 May 2012, 12:27 AM Reply Like
  • Hendershott
    , contributor
    Comments (1616) | Send Message
     
    I hate buying opportunities. China orders down 8%. Chinese companies and the government won't buy western equipment unless they have to. They will buy equipment from Hauwei and others based on technology obtained from western companies. It's a black hole for tech companies. Enterprise spend down; the Cloud and less spending by HFT outfits whom have pulled back from trading. They were big spenders but you'll notice the decline in trading volumes particularly recently.
    9 May 2012, 08:08 PM Reply Like
  • Ujjaldebroy
    , contributor
    Comment (1) | Send Message
     
    What about ramp up in Intel's Romley creating more opportunity in 10G Ethernet switching products. Even Dell’Oro expects 10G Ethernet to contribute majority of revenue in Ethernet switching by 2016.
    Cisco being the market leader should benefit out of this... isn't it???
    10 May 2012, 03:29 AM Reply Like
  • Deltascared
    , contributor
    Comments (323) | Send Message
     
    Do you guys feel guilty about asking that Mr. C be fired?

     

    The advisor who touted this firm to me has remarks that would make yours look tame.

     

    I have stock. Worse yet, am sitting on $30 options for Jan of 14!!!

     

    I shall do some research but this looks like an option burial ground and a good place to get a flat return with the worry of becoming another RIMM. Wonderful.
    10 May 2012, 09:43 AM Reply Like
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