Conference call notes:
Now moving on…
Revenue: $5.6 B, 22% y to y
84% products, 16% services
8th consecutive q of more than $1 B in income
EPS: GAAP: $0.17, Pro-forma: $0.19
Net income as % of revenue: 21 (GAAP), 24 (Pro-forma)
Gross margin: 68.8%
Cash flow: $2.4 B
Stock buyback: $3 B, average price $23.32
Cumulative: $15 B, 866 M shares, Avg price: $17+
Buybacks dramatically exceeded stock option exercise
Share balance (float?): 6.79 B
Talks up on benefits from options: cash from share exercise & tax benefits (FASB take note <g>)
$18.9 B in Cash & Investments
Book to Bill ratio: 1
Booking growth: up by 10%
Enterprise & Commercial: up by 13%
Solid linearity in q
Product mix:
Routers: 23%
Switches: 41%
Advanced Technologies: 16%
Other (Access, NMS, Misc): 4%
Services: 16%
"Continuing foreign exchange impact"
Linksys: $174 in revenue
Accounts receivable down to $1540 M (from 2,040 in prior q)
DSO: 27 (down from 34)
Inventory: 1,121 (up from 933 M in prior)
Deferred revenue: 4,357
Headcount: 34,307 (up 1% from prior q. Acquisitions of Riverhead, Andiamo & Twingo, +200 new hires)
Operating expense: 38% of operating revenue. Goal is 35%
Geographical Product Bookings:
U.S.: 46% (up 1%)
EMEA: 30%
Americas International: 6%
Japan: 8%
Asia Pacific: 10%
What went well:
Enterprise & Commercial (up 13% in the weakest q. Significant upturn)
Federal up 20%
CEO's more optimistic
U.K.: up more than 20%
China: down (seasonal), India up
Japan: up, SP orders typically lumpy
y over y product revenue growth of approx 25%
Good order growth balance in Enterprise, Commercial & SP
Good balance across all geographic theaters
Continued momentum in Advanced Technologies
Security (mid teens %)
Wireless 20+ %
IP Telephony (more than 3 million phones shipped, monthly shipping numbers accelerating)
Record cash flow from operations of $2.4 B
Routers & Switches (fixed, modular) all grew in low teens
Productivity: $700 K per employee
Anticipated new hiring: 1,000 (mainly in Engineering & Sales)
Areas of general concern / Challenges:
DSO & Lead-times improved
Inventory turns was 6.3 (goal is 8)
Potential new competitors from Asia (? Huawei, ? UT-Starcom)
Linksys, purchased at 1x revenue, grew at <high> %
Broadband penetration: 26% in the U.S., growing at 40% annually.
Alliance with IBM: Both companies estimate $1B in revenue (per year?) from this partnership.
Alliance with Ericsson: Combines wireless expertise with IP technology.
Exceptionally strong q, given seasonal weakness
4th q of sequential revenue growth
Allocating business: 12 to 36 months ahead.
Network Architecture evolution & expectation
More optimistic than going into the last q
Improving, yet cautious approach to CapEx and hiring.
Customer budgets increasing, albeit at a slower rate
As our Customers business improves, so will ours
Q4 guidance:
Revenue: Up 3-5%, y-to-y: 23%-25%
Gross margins: 67-69%
Q4 will also have similar differentials between GAAP & Pro-forma.
Share count down 30 to 50 M
Cash flow: $300M to $600M per month
Only guidance will be through financial disclosures
Next quarterly call: Aug 10, 2004, 4:30 p, EST
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