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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: MMW who wrote (22100)	2/6/1999 3:17:00 PM
From: jach	Read Replies (2) \| Respond to of 77397

Cisco Soars In 2Q, But Sees Challenges Ahead -- Router Maker Wary Of Pricing Pressure Eileen Colkin and Mary E. Thyfault February 08, 1999, Issue: 720 Information Week Big companies tend to grow slower than small ones, but apparently no one mentioned that to Cisco Systems (CISCO-Nasdaq). Last week, the networking hardware giant reported revenue of $2.83 billion for the second quarter ended Jan. 23, a 40% increase over the second quarter of last year. Net income, excluding one-time charges related to Cisco's acquisitions of Clarity Wireless, PipeLinks, Selsius Systems, and Summa Four, was $606 million, up 33% from the $457 million it earned for the second quarter of 1998. Net income including the acquisition charges was $288 million. Cisco attributed the solid showing to strong sales of its networking hardware, including enterprise LAN switches, and growing demand for its network architecture products, which allow voice, data, and video to travel over a single network. But Cisco CEO John Chambers cautioned that the company is starting to feel pricing pressure in the enterprise market. Jennifer Pigg, a technology analyst with the Yankee Group, says Cisco's earnings will be squeezed as it shifts its focus from routers to switches. "The switch margins are nothing compared to router margins," she says. "Even though their revenues are climbing, they are looking for a software Messiah-a differentiator-to give them higher margins." For this reason, Cisco is focusing on adding voice-over-IP and policy networking capabilities to its products. Policy networking lets network administrators place certain users or types of traffic ahead of others. For the first half of fiscal 1999, the company generated revenue of $5.4 billion, up 39% from the first-half of 1998. Net income, excluding one-time charges, was $1.2 billion, a 33% increase over the first six months of 1998. Copyright ® 1999 CMP Media Inc. ======================= interesting extracts: Cisco CEO John Chambers cautioned that the company is starting to feel pricing pressure in the enterprise market. Jennifer Pigg, a technology analyst with the Yankee Group, says Cisco's earnings will be squeezed as it shifts its focus from routers to switches. "The switch margins are nothing compared to router margins," she says. "Even though their revenues are climbing, they are looking for a software Messiah-a differentiator-to give them higher margins." ============================= 1. The president said starting to feel pressure. Switch margins are no comparison to Routers. 2. The chairman sold around 1 Million shares in Dec for around 70$. 3. The potential of nasdaq (which already went up 70% in a few months) to come down 20% is very real. CSCO drop rate is much higher than nasdaq drop rate. Had been saying it all along, margins are going to come down. Now, finally the follow-the-herds crowd seems to be getting it also. Based on these facts, getting in at these astrnomical price is a pretty high risk considering the fact that there are many investors ready to dump and take their profits. Many MFs and investors had already cycled into the more DOW oriented ones from the high-flying Nasdaq. The January effect is done and look for the downturn staring now and will go into the summer downside doldrums. imo.