--> CSCO is trading ~4% lower in pre market at $21.97.
Cisco Systems: Color on qtr
- Stifel notes CSCO's quarter came in largely as expected with continued headwinds in emerging markets and switching and routing transitions. Revenues of $11.15 bln and EPS of $0.47 beat consensus of $11.03 bln and $0.46. Product gross margins were a little concerning -- down to 58.8%, a level not seen since 2001. Co blamed the lower gross margins on volumes. There is some glimmer of hope -- emerging markets improved slightly in the quarter and the company is building backlog, exiting the quarter with the highest Q2 backlog as measured in weeks in the last 10 years. US enterprise and commercial continued to show strength. Guidance for April calls for revenues to be down 6-8% y/y. Commentary on the call suggested that the issues will likely linger through Q4/Q1 before we see y/y growth. Opco notes Cisco reported in-line January-quarter results and April-quarter guidance.
- FBR notes CSCO quarterly results reinforced our idea that the networking space will undergo a period of transition beginning in 2014. The networking heavyweight posted a mostly in-line quarter with revenue at $11.2B (-7.8% YOY), slightly above the consensus $11B estimate. GMs sagged to 61.3%, close to FBR's 61.2% estimate and below the 61.9% consensus but still within the guided 61%-62% guide. Vigilent opex controls and one of the more aggressive share repurchase efforts on record at $4B helped keep EPS of $0.47 just above the consensus $0.46 estimate. While FBR's checks indicate that Cisco has developed a competitive suite of products for the next phase of its transformation, it continues to expect these products to take at least two to four quarters to begin to offset the current negative trends in the core business.
- RBC notes CSCO's Jan-qtr results and Apr-qtr guidance continue to represent a modest negative for supply chain companies, as demand momentum in core switching and routing markets remains challenged. RBC believes Apr-qtr guidance implies modest downside for CLS and JBL relative to their expectations for networking-centric markets in the upcoming quarter. CSCO exposure: CLS: 10%+ of sales via routers. FLEX: ~6-8% of sales via switches, routers, and infrastructure equipment. JBL: ~7--9% of sales via routers and switches, APH: ~4% of sales, TEL: ~2%.