Stock analysis: Cisco's latest earning report

A not bad earning but very bad outlook. As Cisco beat both revenue and earnings their guidance for next quarter is far below expectations. http://www.reuters.com/finance/stocks/keyDevelopments?rpc=66&symbol=CSCO.O&timestamp=20101111023000

“Cisco Systems, Inc. announced that for fiscal 2011, it expects annual revenue to grow in the range of 9% to 12% on a year-over-year basis. For the second quarter of 2011, it expects revenue to be in the range of 3% to 5% on a year-over-year basis and earnings-per-share (EPS) to be in the range of $0.32-$0.35 per share and GAAP EPS to be in the range of $0.08-$0.10 per share lower than the non-GAAP EPS. The Company reported revenues of $40.040 billion in fiscal 2010; revenues of $9.815 billion in the second quarter of 2010. According to Reuters Estimates, analysts were expecting the Company to report EPS of $0.42 on revenues of $11.083 billion for the second quarter of 2011; revenues of $45.279 billion for fiscal 2011. “

So there you have it, ~17% drop after the ER day. Has the fundamental changed? Probably not, Cisco is just getting large and hard to grow fast. Acquisition helps growth but as you might know the cost of acquisition is also usually high. Many times so called synergy never materialize. I believe it won’t be an exception for Cisco.

For people don’t know Cisco, here is short intro from Google finance:

Description

Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology (IT) industry and provide services associated with these products and their use. The Company provides a line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Its products are designed to transform how people connect, communicate, and collaborate. Its products are installed at enterprise businesses, public institutions, telecommunications companies, commercial businesses, and personal residences. The Company has five segments: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Emerging Markets theater consists of Eastern Europe, Latin America, the Middle East and Africa, and Russia and the Commonwealth of Independent States. In September 2010, the Company acquired Arch Rock Corporation.

I really like the telecom concept and have been enjoying the Skype and such products. Communication is supposed to be easy. The trend as I see is on mobile communication: facetime etc.

In theory, IT spending should pick up as economy slowly recover. But Cisco’s guidance told a different story. Let’s hope it’s a localized issue.

Now let’s take a look at how analyst view Cisco: pretty bearish lately.

How is the stock perform on earning report day? Not exciting at all.

Non-GAAP earnings: not good growth sign. (compare it with Amazon you’ll see what I mean sign of growth).

The stock of the company seems really stuck into a range if you look back five years. I don’t blame investors since I don’t think I want to own their stock even after 19% drop.