Even the bullish forecasts for Cisco's Q1 fell far short. Cisco this week posted first quarter results that far exceeded Wall Street, and its own, expectations.
Sales for the first quarter ended Oct. 24, 2009, were $9 billion. Analysts queried by Thomson Reuters were expecting $8.74 billion in revenue. Likewise, earnings for the quarter came in $.05 better per share on a non-GAAP basis than expected. Non-GAAP earnings per share were $.36 vs. Street estimates of $.31.
Sales in the quarter were down 12.7% from the year ago period. Non-GAAP earnings per share were also down, by 14.3% from the first quarter of 2009. On a sequential basis, revenue was up 6% from Q4, 2009. Earnings per share were up 16% from Q4.
The revenue figures even surpassed Cisco's expectations, and guidance. Cisco guided to a revenue dip between 15% and 17% from Q1, 2009.
"The quarter was very strong given our expectations and economic challenges," CEO John Chambers said during a conference call on the Q1 results. "We are very pleased with the results."
Chambers added that he felt like Cisco hit bottom in Q3 of its 2009 fiscal year. Q4 felt like the beginning of the upturn and, well, Q1 feels like "The recovery is well underway," he said.
Results domestically were especially dramatic. Orders in the US were flat from last year's Q1 vs. being down an average of 20% since then.
Enterprise orders were up 10% from last year.
Chambers added that Cisco was still able to enter 30 market adjacencies while reducing expenses and headcount. A year ago, Cisco employed 67,647; it now employs 63,756, a decrease of almost 4,000 over the past year.
At least 2,000 of those positions were part of the headcount reduction plans announced in Q2, 2009. Another 2,000 were apparently due to the ongoing limited restructurings Cisco implements but does not announce.
Lowlights for the quarter were a 30% year-over-year revenue decline in Emerging Markets; this market was previously pegged by Cisco officials to be capable of 30% to 40% growth annually.
Chambers said pricing in these markets was especially aggressive, making it unappealing for Cisco to aggressively pursue.
Another lowlight was product revenue in certain Advanced Technology segments. Video was down 29% even though revenue for TelePresence grew 100% year-over-year. Application Network Services was down 25%, Storage down 19%, Networked Home down 18% and Unified Communications down 10%.
Indeed, the only AT that grew was Wireless, at 7%.
Switching was down 21% from last year, even though Cisco now has 1,000 customers for its Nexus 7000 data center switch. Router revenue was down 17% from a year ago.
Nonetheless, Cisco guided to a bullishly aggressive Q2. It expects revenue to be up 1% to 4% from last year's Q2, and up 2% to 5% sequentially.
"We clearly had a strong Q1," Chambers said. "We will provide guidance for a strong Q2."
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Telepres?
Telepresence grew 100% year over year? Looks like Mr. Reese's piece on Telepresence hitting a brick wall was not much more than FUD, as I predicted.
What's your definition of FUD?
What's your definition of FUD?
Here's my take on FUD:
We took an almost 30% hit in video, but we're up 100% in TelePresence (TelePresence isn't video?).
Now if only we knew the dollar amounts!
Because 100% of ZERO is still ZERO.
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
Flawed logic?
See, in order for something to hit a brick wall, that would imply a downturn in sales. We're talking strictly Telepresence here and in your article, which increased by 100%. Sure, other things may have declined in the video area but Telepresence is definitely up.
So yeah, looks like it actually blew right through your "brick wall."
I'm very flawed and I have absolutely no logic
I agree with you that I'm very flawed and I have absolutely no logic.
During the earnings call John Chambers said:
I know that you're loading up on Cisco stock, so please tell me, with 85 new customers during the quarter, exactly how much TelePresence revenue (dollar amount) was generated?
Tell me, why do you find it NOT the least bit suspicious that John Chambers gives a "dollar figure" for the revenues of Pure Digital, but not TelePresence?
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
Hey Brad, I agree that
Hey Brad,
I agree that seeing an actual $ amount would shed more light on tele-presence's success. However, growth in this area does suggest one thing. Organizations are beginning to understand that video can be utilized to transform their business processes by enabling collaboration while cutting cost. I work for a global organization who currently uses Cisco's tele-presence. I use the technology 4-5 times a week. I travel less, have lower expenses, and have extremely productive meetings with my global team.
I'm a firm believer that Video will be a key driver in enabling more collaboration in large organizations. This seems to be a double whammy for Cisco, as video will also drive bandwidth needs in the enterprise and service provider space. The question is, how much market share is Cisco capturing? Are business decision makers complacent with their current video conferencing, or do they desire a better experience? Time will tell I guess. If there is one thing I'm confidant of, it's video is the future, and Cisco is well positioned in the market to be a leader as more companies adopt this new collaboration paradigm.
Cisco video product revenue had the highest decline
Cisco video product revenue had the "highest decline" among all of Cisco's products, down 29%, and TelePresence is clearly counted and included by Cisco as one of its video products.
Additionally, you and Cisco keep harping about how important video is to Cisco's future, yet it's the Cisco video product revenue that's falling off a cliff!
I'm amazed that you're calling video Cisco's future while simultaneously you appear to be totally O.K. with Cisco's video revenue (page 24) being Cisco's worst performing category.
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
Cisco's emerging markets remain challenged
"Cisco's results were strong with revenues growing +6% sequentially in what is typically a seasonally weaker quarter. Non-GAAP EPS due to strong gross margin contributions despite some concerns of pricing came in at $0.36 vs. the consensus of $0.31. Book to bill was greater than 1.0 and Cisco endorsed revenue guidance in a range of +1 to +4% YoY implying a top end estimate of $9.45B vs. the prior consensus of $8.97B."
Sue continued, "Product revenue declined -17% YoY, but improved significantly on a sequential basis to $7.2B (+7% QoQ). Total product order growth was down in the high single digits YoY as Cisco saw most of its end markets stabilize and show a rebound in sequential growth led by the U.S (55%) driven in particular by the Enterprise segment. Good growth was observed in Asia (11%) and Japan (4%) while even parts of Europe (20%) showed solid improvements. Emerging markets (10%) remain challenged."
Sue added, "From an end market perspective, order growth was driven by Consumers up 20%, while the Public Sector was up +4 YoY, Commercial and service provider orders lagged down in the low double digits."
Sue concluded, "Gross margins beat most expectations of 64.5%, increasing from 65.3% to 66.31% driven largely by higher product gross margins as a result of lower discounting and higher cost savings; guidance remains conservative at 64% to 65%. Balance sheet metrics remain squeaky clean with cash generation of $1.5B per quarter; net cash now stands at $35B or 4.27/share. DSOs in what was a very linear quarter were 32 days vs. 34 days. The strong results, improving visibility and crisp execution combined with strong financial metrics are behind our positive thesis."
------------------------------------------------------------
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
Telepresence Zero?
Surely you aren't naive enough to think that Cisco's Telepresence business is Zero? It seems as though Mr. Reese is more interested in making negative predictions than being accurate.
Without out dollar amounts
Without a dollar amount, exactly how material is a "percentage"?
TelePresence units sell for hundreds of thousands of dollars and Cisco is too shy to reveal dollar amounts of TelePresence revenue?
It's my opinion that Cisco is not being forthcoming with regard to TelePresence revenue, otherwise, Cisco would reveal the dollar amounts.
Sincerely,
Brad Reese on Cisco
Network World Cisco Subnet
BradReese.Com Cisco Refurbished
Enabling Affordable Networks
Further color on TelePresence
In the most recent earnings call, John Chambers says Cisco sold 3,200 TelePresence units in the 3 years it's been available, or 267 per quarter. In Q1, Cisco sold 570 TP units -- more than double the average -- while adding 85 new customers. So on a unit basis, the product is clearly growing. Without the actual revenue figures however, we'll just have to take Cisco's word for it that revenue doubled in the quarter.
But TP is not the only video offering Cisco has. These products (http://www.cisco.com/en/US/products/hw/video/index.html#products) are perhaps the ones responsible for the 29% revenue shortfall in Q1.
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