CSCO chat shortfall
I just read the chat transcript of the live CSCO coverage by Adam and Jim Seymour. Very poor as it really missed some of the key points of the call such as the tornado markets, market share, and global outlook. Some points on the receivable and inventory were caught by chat readers, but very little discussion on what Chamber said.
An excerpt from when the call started to end:
jseymour1: The 10% of total revenues (i.e., 10% of $6.75B in this Q), really needs improvement. CSCO oughta be up around 30%. BIG opportunity for improvements ahead.
RM_Adam: Company is talking about how it's got too much inventory. There's a shocker, see PMC-Sierra (PMCS:Nasdaq - news - boards).
harvmel: Several = more than 2?
jseymour1: Remember that CSCO inventory was up 56% in the LAST quarter. They should have worked that down much more aggressively. DSO up 7 days. Not good. ("DSO" = "Days' Sales Outstanding," or how far behind your customers are on paying you.)
keetz4: Accts Receivable increased from 625 million to 3.5 billion....ouch!
jseymour1: CSCO says year-ago forward contracts for component suppliers now hurting them -- those contracts were based on the year-ago estimated demand, which of course is now way down. "More selective" on supplying vendor financing in Q2.
RM_Adam: Note that 28% of Cisco Capital's activity was in 'structured loans.' Those are the kind that aren't high quality credit-worthiness. Don't recognize that revenue until the loan is paid.
jseymour1: This is not a stock-breaking call, but it is not a winner, either. At this point, I'd say CSCO won't be down all that much in after-hours, but will open down a little tomorrow, then, probably, trade-up a little more.
RM_Adam: Here goes john chambers, global businessman. Talking about his relationships with politicians in India. He suggests India will be next china for Cisco.
jseymour1: John Chambers = Secretary of State for the Tech Industry
RM_Adam: "Confidence and pride" in Europe, says Chambers. This is getting weird... we want to hear more about the U.S.
jseymour1: ...but John doesn't want to TALK about the U.S....!
RM_Adam: Says Japan is strong. 100% year over year revenue growth. That's good, but onto U.S. NOW.
RM_Adam: Percentage of revenues in U.S. is 49% versus 54% in the fourth fiscal quarter, this is the fiscal second quarter.
jseymour1: I just don't care if CSCO wins the London Sunday Times' "Best place in the U.K. to work" award. I want raw meat! John, tell me about products, revenues, visibility!!! Service-provider business, not surprisingly, ebbing.
RM_Adam: Flagging some concerns in "enterprise" business, esp. in manufacturing. This cautiousness is about what should be expected.
jamesliv: Guys, if the "king" can't make the numbers by channel stuffing and vendor financing, not to mention days receivables going up and investment income disappearing, doesn't that seem to spell disaster for the whole tech sector. It sounds like a whole new definition of tech wreck!
jseymour1: Too easy to see CSCO as a symbol for all tech.
hayesme: Adam, They're waiting for us to fall asleep first.
RM_Adam: I feel for those of you on the east coast. It's late there!
jseymour1: It IS a snoozer....
RM_Adam: Hard enough to stay awake in sunny California. Chambers saying he's "pleased" at Cisco's ability to adapt in changing times.
jseymour1: Chambers now onto the Aironet 350 wireless system -- enterprise-class wireless -- but word came out this week of security holes in the Aironet line.... Unlikely to see major commitments to it until/unless those holes definitively plugged. ZZzzzzzzz.
jseymour1: John is into his "wildcard" comments now, always one of his faves, and in truth, usually one of the liveliest parts of the call. Not today. Hmm: Is there a "Survivor" re-run on?
RM_Adam: Okay, funny, but this is important stuff. Note that Chambers has said several times that the weakness in the enterprise is in the manufacturing sector.
jseymour1: Alternative service provider business down 40% for CSCO in Q2. Sure: They're broke!
RM_Adam: Who else sells to manufacturers?
jseymour1: One take-away from this call is how much more important non-U.S. sales will be for CSCO.
RM_Adam: At least for now Jim. In other words, I'm not sure non-U.S. always will be this important. But while the economy is slowing in the U.S. it sure will be.
jseymour1: OC-192 cards for CSCO products are just a toe in the water. CSCO needs to be in lots more 192 products than just its newer routers. Exactamente, Sr. Lashinsky. Foreign sales will be an important port in this storm for lots of big U.S. tech companies. Chambers on overall strategy changes now.
RM_Adam: Lead quote for the morning papers: "This capital spending trend could get worse before it improves."
poppopsam: Cisco conference call and comments? Haven't been this bored since...ever!
RM_Adam: Hold on, folks, you gotta lissen. They're ALWAYS this boring.
jseymour1: Popps, sometimes boring is good. Or at least, not as bad as [some] expected! This call is turning out better than the bears had hoped.
RM_Adam: The exciting stuff comes when the analyst question starts. That is, if Cisco lets anyone else ask questions.
jseymour1: What I fear is not boredom, but the ugly excitement of, say, the PMCS call last week. Fifth of five wildcard topics underway now; then on to the Q&A.
jseymour1: CSCO needs someone who's written radio scripts --writing for the ear, and briefly -- to write these conf-call scripts for them. Interesting factoid: this year, for the first time since '93, PBX sales fell. Nice sign for the VoIP and especially the enterprise VoIP markets.
RM_Adam: I figure the stock drops in the aftermarket 50 cents every time Chambers mentions the Davos conference.
jseymour1: Just said 'Davos' again, Adam.
_99edm: Sounds like Chambers is pretty optimistic about the future? I'll bet this stock goes up on short covering 2/7.
jseymour1: Just took a look at the Island ECN book: CSCO matching at $33.68 now.
RM_Adam: They're being defensive now. That's what I was concerned about earlier.
jseymour1: Worth noting: As CSCO nears $30, it becomes much more buyable for the big funds. For CSCO "believers," tomorrow morning may be a time to scale-back-in, or scale-back-up, on yr positions. Flat is OK; defensive is not, right, Adam? "We are in a two-calendar-quarter slowdown," says Chambers.
RM_Adam: To your previous question, Jim, yes. Chambers is going out of his way to say that a company of Cisco's size can't avoid slowing down when economy does. Sounding defensive.
jseymour1: I wouldn't want to be very short CSCO the rest of this week. Again, far from a bang-up call, but rather a "good-enough" call. Saying "30%-50% growth" is likely, again.
RM_Adam: Jim, they're about to take down the numbers. I think you are wrong.
jseymour1: "Detailed guidance model" coming up...
hayesme: Banking on tax cuts and overseas stability.
jseymour1: Next two quarters: Q3 revs flat to down 5%, Q4 revs flat with Q3.
jseymour1: Rev growth for 2001 40% over previous yr. 60% avg. gross margins next two Qs. "Inventory-related issues" likely to pull down gross margins one percent or more over next quarter. "Inventory could be up somewhat again" in the next quarter.
RM_Adam: Jim, I know we're wrapping up soon, so I want to re-emphasize something: this was not a good call. Visibility is weak, that's not good.
jseymour1: Well, Adam, I agree that it's not a good call. The real question is whether it's a BAD call. And it isn't. It's a slightly down call, not a crusher.
jseymour1: FYI, CSCO now matching on Island at $$33.60 -- just very slightly down from 45 minutes or so ago (at $33.68), before this tag-end of the call, with the guidance, began...
jseymour1: Glad you joined us here this afternoon, RealMoney.com subscribers. A little ragged, thanks to CSCO's call problems. And we'll see LOTS on interpretation on this one tomorrow morning! See you next time JS
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I can't imagine using this chat to glean info from the call vs. reading other SI notes of the call live. Only seven questions from chat participants. What a joke. Either the two didn't want to answer chat questions, or they ignore them, or no one tuned in. I was on a chat with Cramer once and there must have been 50 questions in 30 minutes. Cramer did try to answer many with oneliners.
This is analogous to the super bowl having two commentators saying the Ravens just scored again and complaining how boring the game was. This conference call was about an hour and the discussion makes it look like it was 10 minutes.
Jack |
