CSCO...Cisco Systems came out just ahead of Wall Street estimates in its third quarter, the company reported after market close Tuesday, but said increasing competition is pressuring margins in its key businesses.
Operating income was $483 million , or 45 cents per share, excluding charges related to acquisitions.
According to First Call, Wall Street had been expecting earnings of 44 cents per share.
Total revenue for the quarter was $2.2 billion, a 38 percent jump over last year's quarter. In the third quarter of fiscal 1997, Cisco reported net income of $358 million,or 35 cents per share. After charges, net income was $65 million, or 6 cents per share.
In the third quarter, Cisco took a charge of $419 million related to the purchase of Lightspeed, WheelGroup, and NetSpeed. Also, Cisco completed its acquisition of Precept Software for about $84 million.
By the end of the year, Cisco (companyprofile) intends to have 10 to 15 acquisitions under its belt, said CFO Larry Carter. He expects one half of those acquisitions to be in voice and data.
In a conference call Tuesday, CEO John Chambers said revenue growth showed a "good balance" across the Americas, which contributes about 60 percent of the company's total revenue.
Europe showed improvement in sequential quarterlygrowth, Chambers said, though he expects Asia to get worse before it gets better. "China...is the only bright spot in Asia," Chambers said. "As far as Japan is concerned, not only am I pessimistic, but in 16 years of travel there, I have never seen the Japanese businesscommunity so pessimistic." About 11 percent of Cisco's revenue comes from Asia.
Gross margins for the quarter were 65.7 percent, an increase over the year-ago quarter and sequentially, which Chambers credited to lower memory prices. But progress in gross margins was offset by "aggressive pricing from many competitors," he added.
The company's goal, Carter said, is to keep operating
expenses around 34 percent. "As we go forward the next couple of quarters, operating expenses may be slightly higher than 34 percent, but we'll reassess to keep that down somewhat," he said.
To do that, Cisco is relying heavily on sales over the Internet. Carter said the company books more than half of its orders over the Internet.
Shares of Cisco [CSCO] closed down 1 5/16 to 73 7/8 Tuesday, ahead of the earnings release
with CSCO's new line of multigigabit switches and its revamping of it's e-commerce site to handle massive internet orders I think CSCO has a great future as a long term/mid term hold. I'm just concerned about the chart pattern in the next few days. I know it was up in after hours trading and I was glad, but in a purely TA analysis the stock looked to be in distribution. MACD is still strong as well as Relative Strength but I'm not sure it can sustain being so close to it's 52 week high of 75.75 and break through resistance. Last time it broke through the upper bollinger band it fell below it and Relative Strength fell as well. That is why I chose to sell my options and keep my stock. CCI did show a sell signal this afternoon when I downloaded latest prices..Bollinger Bands gave a sell signal as well. This, of course, had nothing to do with the fact that CSCO was up in after hours trading. As a pure daytrade tomorrow CSCO will have much volatility. |
