Cisco: Order Backlog Has Fallen 30 Pct
Wednesday September 18, 2:37 pm ET
CHICAGO (Reuters) - Cisco Systems Inc., the largest maker of equipment that directs Internet traffic, on Wednesday said its order backlog has fallen 30 percent over the past year, raising concerns among analysts that the company may not meet revenue expectations in the current quarter.
San Jose, California-based Cisco said in its annual 10-K filing with the U.S. Securities and Exchange Commission that its backlog was about $1.4 billion on Sept. 9, down from about $2 billion a year earlier. Backlog includes orders for products to be shipped within 90 days.
"That's a pretty steep decline," said one analyst, who asked not to be identified.
Cisco had a backlog of $3.83 billion in September 2000, and $922 million in September 1999, a company spokeswoman said.
"Cisco does not believe that its backlog, as of any particular date, is necessarily indicative of actual net sales for any future period," the company said in the filing.
Cisco previously has said it is focused on reducing its product delivery lead time and improving customer satisfaction, and that leads to lower backlog figures.
Cisco shares were off 14 cents, or 1 percent, at $12.40 in heavy Nasdaq composite afternoon trading.
The company said last month that it expects revenue in the current quarter, its fiscal first quarter, to be unchanged or slightly higher compared with the fourth quarter's $4.8 billion.
Analysts expect Cisco to earn 13 cents a share in the current quarter, before one-time items, on revenue of $4.89 billion, according to Thomson First Call. In the same quarter last year the company had revenue of $4.4 billion.
"You have a lower backlog and a higher revenue expectation right now. Obviously, that's a red flag because those two things go counter to each other," Prudential Securities analyst Inder Singh said.
He said he had heard Cisco's August business in its two largest segments, routers and switches, was slow, but there was still plenty of time to make up any possible shortfall as more than half the quarter's business was expected in the second half of a quarter, which ends Oct. 26.
"It's still early to completely say that they're not going to make it," said Singh, who has a "buy" rating on Cisco shares.
CIBC World Markets analyst Steve Kamman said Cisco's backlog was simply returning to historical rates the prevailed before the boom years that telecom experienced in 1999 and 2000 before spending collapsed.
He said the $1.4 billion backlog is 29 percent of revenues, while the $2 billion backlog was 45 percent of sales. The rate in September 2000 was 58 percent; in September 1999 it was 24 percent; and in September 1998 it was 27 percent, he said.
"The backlog is coming off phenomenal numbers from the bubble years," said Kamman, who has a "sector perform" rating on Cisco shares. "Less backlog is not a good thing, but what you're really returning to is a more normal trend level." |
