I'm posting this for future reference (CSCO $18.37):
Cisco Sees More Caution Among CEOs About US Economy >CSCO
08/11/2004
Dow Jones News Services
(Copyright © 2004 Dow Jones & Company, Inc.)
By Nick Baker
Of DOW JONES NEWSWIRES
(This article was originally published Tuesday)
NEW YORK (Dow Jones)--Cisco Systems Inc.'s (CSCO) top executive believes his peers at the helm of other companies have become more cautious about the economy over the past three months, although these leaders still expect economic growth in the U.S.
Cisco's own performance during its just-completed fiscal fourth quarter showed robust growth, Cisco Chief Executive and President John Chambers said during a conference call Tuesday. And, indeed, it was revealed during the call that Chambers' salary, which was cut to $1 in April 2001 amid the major industry downturn, has been boosted to $350,000 because things have improved.
Still, corporate CEOs are showing greater conservatism, Chambers said, especially in light of recent disappointing U.S. jobs data. "My caution (is) purely from what I hear from CEOs," he said, adding that they see more modest, but not negative, U.S. economic growth.
During the call, Cisco predicted that sales for its fiscal first quarter, which ends in October, will be unchanged or up by 2% versus the fourth quarter, or up 16% to 18% versus the year-earlier first quarter. That puts Cisco's prediction at $5.93 billion to $6.04 billion; the average estimate of analysts polled by Thomson First Call is $6.02 billion.
Gross margin for the first quarter should be 67% to 68%, Cisco Chief Financial Officer Dennis Powell said. Operating expenses should increase by 2% to 4% in the first quarter versus the fourth quarter as the company continues to hire more employees, he added.
Cisco began hiring in the July quarter, having announced in May that it would add 1,000 workers this year. Only 64 net employees were hired during the fourth quarter, bringing payroll to 34,371.
Cisco hasn't met its goal of hiring only when annual revenue per employee reached $700,000. Sales per employee was $690,000 this year, Chambers said Tuesday.
Cisco's "business momentum" was "solid" during the fourth quarter, especially in the U.S., Chambers said. Orders from U.S. telecommunications service providers as well as the enterprise and commercial segment were particularly robust, growing at a percentage in the mid-teens and high-teen, respectively, he added.
Powell said switches accounted for 41% of fourth-quarter sales, and routers 24%.
Cisco lumps results from its newer businesses in a segment called advanced technology, which generated 16% of Cisco's fourth-quarter revenue. That division shipped 470,000 voice over Internet protocol telephones and got orders for 500,000 more during the quarter. IP telephony sales rose 15% versus the third quarter.
On a sequential basis, fourth-quarter wireless sales increased by 15%, storage rose 41%, optical hardware rose 8%, security fell 2% and home networking fell 5%.
Cisco generated $2.1 billion in cash flow from operations, and Powell said to expect $300 million to $600 million in monthly operating cash flow.
Cisco repurchased 90 million shares, or $2 billion worth of stock, during the fourth quarter. Under its current stock buyback program, Cisco has purchased $16.9 billion in shares.
Inventories will likely increase in the coming quarters to allow Cisco to meet demand for high-volume products, Powell said. Cisco's inventory turns were 6.4 in the fourth quarter, a slight improvement versus 6.3 during the May quarter. However, Cisco cut its target for inventory turns to six to seven, down from seven to eight.
- By Nick Baker |
