Bulletin
Investor Alert

Earnings Results Archives | Email alerts

Feb. 13, 2020, 7:29 a.m. EST

Cisco stock falls as results slightly exceed estimates

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Cisco Systems Inc. (CSCO)
  • X
    Arista Networks Inc. (ANET)
  • X
    Hewlett Packard Enterprise Co. (HPE)

or Cancel Already have a watchlist? Log In

By Jon Swartz


Getty Images
Cisco Systems Inc. reported second-quarter results after markets closed Wednesday.

Cisco Systems Inc.’s stock slid 4.5% in premarket trade Thursday, after the company reported second-quarter profits and revenue that slightly edged Wall Street’s estimates but offered weak guidance.

The computer-networking giant said it racked up net income of $2.9 billion, or 68 cents per share, compared with expectations of $3.2 billion, or 66 cents per share, based on analysts polled by FactSet.

Cisco /zigman2/quotes/209509471/composite CSCO -0.71%   said revenue declined 4% year-over-year to $12.01 billion. Analysts polled by FactSet had expected $11.97 billion.

Cisco also declared a quarterly dividend of 36 cents per common share, up 3% over the previous quarter.

“We executed well this quarter by delivering strong margins and EPS growth while driving more software and subscriptions (72% of software sales, up 7% from a year ago),” Cisco Chief Financial Officer Kelly Kramer said in a statement. As they had in the previous quarter, company executives referred to longer decision-buying cycles amid a general slowdown in tech spending.

As macroeconomic issues like Brexit and trade with China stabilize, “uncertainty will dissipate and some of our customers will pick up again,” Cisco Chief Executive Chuck Robbins said in a conference call with analysts after earnings were announced.

Concerns over the coronavirus will have some impact in China, where Cisco gleans about 2% of its total sales, but it won’t blunt what has been a gradual turnaround, Kramer told MarketWatch in a phone interview. “Our (second-quarter) numbers topped estimates, and we are getting back up,” she said.

See also: Cisco confirms fears of a ‘broad-based’ slowdown in tech spending

The San Jose, Calif.-based company offered current revenue guidance that will decline 1.5% to 3.5% from a year ago ($13 billion), and earnings of 62 cents to 67 cents per share (vs. 69 cents a year ago). Analysts polled by FactSet expect third-quarter revenue of $12.6 billion and EPS of 71 cents per share in the current quarter.

What is more, Cisco disclosed it would have a $300 million restructuring charge that would include severance and other costs, with $150 million recognized in the current quarter. A Cisco spokesman declined to specify the number of job cuts.

See also: Opinion: Cisco’s customers are still on ‘pause’ amid coronavirus scare and layoffs

JMP Securities analyst Erik Suppiger told MarketWatch he was “surprised” by a 6% drop in Cisco’s orders year-over-year, the worst he’s seen from the company since the 2008-9 recession. He was especially surprised that North America was the source of the biggest deceleration.

While Forrester analyst Glenn O’Donnell remains convinced Cisco is the “dominant force in enterprise networking,” he acknowledges it faces increasing pressure Arista Networks Inc. /zigman2/quotes/206966450/composite ANET -2.36%  and Hewlett Packard Enterprise Co. /zigman2/quotes/201998588/composite HPE -0.20%  .

Cisco shares are up 5.1% over the past 12 months. The broader S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.06%   is up 22.8% over the past year.

/zigman2/quotes/209509471/composite
US : U.S.: Nasdaq
$ 47.43
-0.34 -0.71%
Volume: 17.05M
Aug. 7, 2020 4:00p
P/E Ratio
18.83
Dividend Yield
3.04%
Market Cap
$200.26 billion
Rev. per Employee
$684,933
loading...
/zigman2/quotes/206966450/composite
US : U.S.: NYSE
$ 230.80
-5.58 -2.36%
Volume: 1.08M
Aug. 7, 2020 4:00p
P/E Ratio
24.58
Dividend Yield
N/A
Market Cap
$17.55 billion
Rev. per Employee
$935,378
loading...
/zigman2/quotes/201998588/composite
US : U.S.: NYSE
$ 10.09
-0.02 -0.20%
Volume: 7.96M
Aug. 7, 2020 4:03p
P/E Ratio
N/A
Dividend Yield
4.76%
Market Cap
$12.96 billion
Rev. per Employee
$510,483
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,351.28
+2.12 +0.06%
Volume: 2.28B
Aug. 7, 2020 5:10p
loading...

Jon Swartz is a senior reporter for MarketWatch in San Francisco, covering many of the biggest players in tech, including Netflix, Facebook and Google. Jon has covered technology for more than 20 years, and previously worked for Barron's and USA Today. Follow him on Twitter @jswartz.

Get news alerts on Cisco Systems Inc. — or create your own.
This Story has 0 Comments
Be the first to comment
More News In
Industries

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.