My CSCO Thoughts
However the talking heads will talk up the pro forma EPS numbers, and the idiot anal-heads that have been stumped again (those predicting that CSCO would miss and guide lower)...will of course jump right in. The Cisco news and related spin will be critical to the open on today. I think it will be seen a a great hurdle and a positive in a market that was expecting the worst. It is too early to predict the end result but the lack of a smoking accounting scandal gun or a dumping of balance sheet items should be positive for a market that was expecting just that. All to often investors do not read balance sheet nor listen to conference calls...the rely on the CNBC Diva Maria and her bumbling fools for the news, or the read headlines only.
Cisco Systems EPS estimates are raised by several anal-heads today: Cautious revenue guidance for the Oct quarter is leading most analysts to trim revenue estimates for Cisco this morning, but better than expected gross margins are leading most firms to up their EPS estimates for Cisco's October quarter and new fiscal year; prior consensus estimates of $0.12 and $0.52 appear likely to go to about $0.13-0.14 and $0.58-0.59.
Now as Paul Harvey is fond of saying...for the rest of the story.
CSCO posted Net sales for the Q4 of fiscal 2002 were $4.8 billion, compared to $4.3 billion for the fourth quarter of fiscal 2001, an increase of 12%, and compared to $4.8 billion for the third quarter of fiscal 2002. (So net sales were flat quarter/quarter) CSCO attributed much of their gains to cost cutting not sales increases. this is the key folks. They said major customers remained cautious but steady...however the telecommunications market remained "challenged". They admitted being hit by a slowdown in their enterprise customer base but said the serious problems in telecommunications only impacted 20% of their income.
John Chambers said in an interview that he was more cautious about the future outlook than he had been in the past. Visibility was tightening and sales in other countries were slipping. He said it was a strong quarter for Cisco and they had done everything possible for this quarter but could not control the economy. (hinting of potential problems ahead) He said book-to-bill numbers for next quarter could fall below 1.0, and another hint that things are getting worse...this means fewer new orders than orders shipped folks.
Net income for the fourth quarter of fiscal 2002 on a generally accepted accounting principle (GAAP) basis, was $772 million or $0.10 per share, compared with net income of $7 million or $0.00 per share for the fourth quarter of fiscal 2001, and $729 million or $0.10 per share for the third quarter of fiscal 2002. (So EPS was flat quarter/quarter)
CSCO’s net sales were down $3.378 Billion or 15.15% year over year, is this something to brag about I do not think so, help me out here please. According to CSCO GAAP net income for fiscal 2002 was $1.9 billion or $0.25 per share with a current price of $13.00 that equates to a P/E of 52 astonishing for a no growth company. And this doesn’t account for the stock options that CSCO refuses to itemize, according to my calculations CSCO’s stock options would drop the GAAP EPS down to $0.08 hence CSCO would have a P/E of 162.50
Cisco also today announced that its board of directors has increased the company's stock repurchase program to a total of up to $8 billion through September 12, 2003. This represents an increase of $5 billion from the original $3 billion authorized in September 2001. Of the $8 billion total, approximately $2 billion has been repurchased to date. (Now CSCO only has Cash and cash equivalents $9.484 Billion and they expect us to believe they are going to use 64% of their reserves to buy back stock?)
