Independent Analyst Comment on Cisco Systems Q3 Financial Results
By David Molony, Ovum Principal Analyst
“Investment analysts were looking for a 10% increase in revenues at Cisco and got 10.4%, so it's job done and smiles all round at the Cisco offices. Except that when you are the top dog in networking equipment for carriers and enterprises (25% market share in both sectors) you cannot stop. You have to get up the next day and do it all over again.”
“One year ago John Chambers set a target to be a $50bn revenue company in 2010. Then, his last full year's results showed revenues about half that, so it looked demanding. But the company ended the year on $35bn and is now at runrate of $40bn or more for financial 2008.”
“Investors never seem to reward Cisco's share price, no matter how well it performs, but the markets do pay attention to Cisco because it's the so-called bellwether of the technology sector, and increasingly of the whole corporate sector.”
“Cisco's recovery this year after a slow start — the beginning of its financial year coincided with the first alarm bells from capital markets, and worries that corporate investments might be affected by liquidity shortage across the board — is therefore doubly important.”
“The message is this is not going to be a rerun of 2001, when investors trashed tech stocks and took other markets with them. Then, Chambers had lit the touchpaper with his warning (late 2000) that inventories weren't clearing the warehouses. The dot com bubble burst when telcos stopped building infrastructure for Internet entrepreneurs with no paying customers.”
“It's different this time around. Now, multinational corporations have new markets in India and China, and increasingly important regional operations they need to be in touch with all of the time. Telcos are not getting any rest - Internet infrastructure is needed globally - and Ovum research shows wireline capex grew 15% in 2007. Governments and public services are moving online. The kingdom of Saudi Arabia is building six wired cities, and Cisco wants to supply network.”
“That's not a Cisco pitch — the company still has to pedal hard to get to that $50bn target. The latest quarterly figures just show it is keeping up.”
“Why don't investment managers love Cisco more? Maybe it is because the company's strategic development is not always easy to follow. Cisco set the markets alight with its version of telepresence (life-size, real-time high def videoconferencing - perfect for your unified communications roadmap), even though it was not first and is not even pick of the bunch. In fact it has a range of video communications products from telepresence to home set-top boxes, and Web-based video networking for developers and small businesses in between. But there's not a single video strategy, and if you are an analyst, it is harder work to figure out whether performance is really increasing, or just the number of opportunities.”
“Still, Cisco's business model is fundamentally simpler than the expanding range and increasing sophistication of products would suggest. The company sells network equipment, and while it also does the services that most vendors insist is where the future lies, Cisco never loses sight of the box sale. For every dollar equivalent a customer spends on consulting with Cisco, it will spend $4 on services (integration, maintenance, upgrades etc — all the things the supplier should be doing anyway!) but $7 on equipment, and that's the bottom line for Cisco.” /PR
- Copyright © 2008-2011 ICT & Internet Business. All Rights Reserved. Powered by Blogger
- Back To Top
- Log in
- Blogger
- Home
Recent Comments-