Looks like yet another good quarter. But how is the company really doing?
I like to review progress of the balance sheet. According to the 8K released yesterday - available at www.sec.gov - despite three quarters of positive "operating cash flow", shareholder equity has declined from 28,029 to 25,981 or 2,048 M$ on an absolute basis.
Of course, shares also declined, to 7,095 from 7,257 on a fully diluted basis.
So equity per share has changed from $3.86 to $3.66 per share in the last three quarters. In a period when the company has reported earnings of $0.54 per share. The discrepancy between reported earnings and reported change in shareholder wealth is $0.74 in the wrong direction.
Indeed, from the peak of its outstanding shares of 7,590 (fully diluted) in October 2000, shareholder equity per share has changed by precisely one penny from $3.65 per share. During which time, the company has declared far more than a penny per share in earnings and operating cash flows.
Tax befits from employee stock options so far this fiscal year were 454 M$. Which means taxable benefit to employees was about 1,297 M$ or about 34% of reported income and 16% of reported wage costs (R&D, S&M, G&A).
Stock options are a good thing? Yes. For option holders.
As far as "beating by a penny" is concerned, big deal. That's 71 M$ for the math impaired. A figure lost in the wash. I agree with Lizzie on this, there's enough jiggly cellulose on the books to make it virtually impossible for a well informed CFO to miss. Not that all companies have well informed CFOs, but by now folks should realize Cisco does.
Check out deferred revenues. Current portion is 3,420 or about 61% of quarterly revenue and a reserve of about $0.48 per share. One penny is about 7 day's variance in recognition rate.
Check out inventories. Recall from three years ago that an increase in inventories translates directly to EPS? Well, in the last three quarters, inventories have increased from 873 to 1,121 M$, or 83 M$ per quarter. There's that penny and a bit to spare.
Despite overall optimism, still appears to me that the company is running in place. Much like the rest of the "recovery" we're experiencing.
Not surprising the market reaction. |
