Cisco Systems, Inc. [NASDAQ: CSCO $35.75]
F2001E EPS: $0.64, down from $0.81
F2002E EPS: $0.75, down from $1.12
LTA
Paul Johnson, Communications/Networking
“Cisco reported its January quarter below expectations,” said Johnson. “Reported revenues of $6.75 billion and earnings of $0.18 per share were below both our and Street expectations. Revenues in the quarter grew 3.5% sequentially to $6.7 billion, the second slowest sequential growth rate in Cisco's history as a public company; year-over-year growth was approximately 55%, decelerating for the first time in 11 quarters. Management attributed much of its overall slowdown to a softening macroeconomic environment and weak telecommunications spending by CLECs, primarily in the U.S. Enterprise continues to be an area of strength for Cisco. However, we believe that a key piece of the story is the increasingly aggressive competitive environment in which Cisco operates. If we are correct, as we believe all signs indicate that we are, then this represents a continuing validation of our general theme on Cisco, which is that the next-gen companies such as Juniper (JNPR $102.19), Redback (RBAK $42.69), and Extreme (EXTR $36.13) are producing faster, denser, and less expensive competing products. The company reduced its Fiscal 2001 revenue growth outlook from a range of 50% to 60% to around 40%, citing the current state of telecom spending and a softening economy. Management continues to believe that 30-50% is the correct growth rate for Fiscal 2002, though feels that the lower end of that range is more probable. We believe that a large part of the cause for this reduced outlook, in addition to the weak CLEC spending environment is the continued loss of market share in key product lines to next-generation companies such as Juniper, Redback and Extreme, among others. We are cutting our estimates substantially to reflect the quarter, the change in outlook, and the competitive environment in which Cisco operates. Although Cisco's lowered stock price may be seductive to investors, we are lowering our rating to a Long-Term Attractive because it is clear to us that the current Cisco may be merely a shadow of its former self.”
robertsonstephens.com
First I heard that CSCO was losing share to EXTR.
Jack |
