Well, gee, Cisco’s results Wednesday started out looking perfectly fine, strong in fact.
It earned a record 43 cents a share, or 33 cents net, up 79%, on sales worth a record $10.8 billion, up 27% year-over-year, which seemed to say spending is coming back. Only trouble was the numbers didn’t match or better yet exceed Wall Street’s rosier forecasts of 42 cents on $10.88 billion. And its margin slipped a point sequentially to 64% in part because of supply shortages.
Cisco said it ran into a disconcerting “mixed signal pattern that we haven’t seen before.”
Orders dropped for maybe four weeks between late June and early July then the pattern confusingly reversed itself. Only you don’t know whether Cisco influenced that turnabout. Its overall product orders were up 23% in the quarter.
Not only did Cisco fail to manage expectations but CEO John Chambers, who has become something of a Wall Street early warning system, made seemingly contradictory statements Wednesday and Thursday about seeing “unusual uncertainty” surrounding spending and jobs, with his customers forecasting only 2% growth in the second half, but Cisco squeezing 12%-18% growth out of that this quarter. And everyone knows John’s a glass half-full kinda guy.
Well, Cisco dropped an initial 9.4% after hours Wednesday only to worsen Thursday to 9.99% and take practically the whole tech sector down with it during a week when the bears came out again in earnest.
After multiple repetitions of the same story it’s still unclear what Chambers thinks will really happen with IT spending going forward other than that the recovery looks like it’s going to be very slow, if not imperceptible, like the Federal Reserve said Tuesday.
Still he said on the basis of things Cisco can “control or influence” it’ll do a conservative $10.64 billion to $10.83 billion this quarter, up 18%-20%. Unfortunately Wall Street wanted projections of $10.95 billion.
Chambers still maintains the possibility of a double dip is “relatively low.” (From your mouth to God’s ear, Johnny boy.)
As an indication of Cisco’s confidence, Chambers said the company would hire another 3,000 people, mostly in the US, the next couple of quarters. It hired 2,000 last quarter. Some observers consider the move risky.
There was a lot of downgrading going on Thursday.
Gartner Tuesday pulled in its second-half worldwide spending projections from up 4.1% in April to up only 2.9%.
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