*OT* Bottom Line For CSCO:
Cisco reported April quarter results that were in line with reduced expectations. Revenue of $4.73 billion was down 4% year- over-year and 30% sequentially. Gross margin declined nearly 10 points to 54.5%, but was modestly above the street forecasts, leading to operating EPS of $0.03 versus $0.13, a penny better than consensus.
More ominously for CSCO though is that the company reported non-recurring, one-time charges of $3.4 billion. These charges should lead to lower operating expenses in the July quarter.
The business outlook in the majority of Cisco's markets remains challenging in the near-term, to say the least.
In the CC, Cisco management indicated that it believed that there would be little to no market for its excess inventory in secondary market because there is already an oversupply of components. This supports the conclusion that inventory levels in the communications equipment supply chain are still at an all time high. This additional indication of inventory difficulties should negatively effect the following stocks : AMCC, BRCM, CNXT, PMCS, & VTSS.
CSCO also noted in their conference call that orders for their Cerent 15454 product, which competes with RBAK's Smart Edge optical transport product, were down. Moreover, CSCO wrote down 450mm in optical component inventories, the large majority which go towards their Cerent business. This could put some pressure on RBAK.
Conclusion:
I would avoid going long CSCO stock in the immediate future. |
