CSCO Q3 results…quick take…
The numbers that matter:
Q3 Revenue: $10.866B
Q3 Product Revenue: $8.669B
Q3 Services Revenue: $2.197 B
Gross Product Margin: 63.9%
Bookings commentary: “about one” from the CFO. This tells me that bookings were around $8.600B. I think backlog going into Q4 is around $4.025B, which is actually slightly less that the start of Q3 hence, the lowered guidance for Q4. For Q4 management guided revenues to be in the range of $10.84B-$11.05B versus the previous guide of $11.7B-$12B. In short, management pulled a billion off the table and they did this in traditionally their best quarter. If you look at the fiscal years between 1994 and 2010, the fiscal fourth quarter was the highest revenue quarter 14 out of 17 years. For people who like statistics, I would state that the stock has never worked when their best quarter was not in Q4. Worrisome was commentary about the switching business, margin pressure and the GM guide of 62%. Through in public sector spending comments and the upcoming deficit ceiling debate and muni market mess I would not be expecting much out of this sector for awhile.
FY12 Guidance: None
If you look at the updated stock chart below, the stock has rallied into the last five prints only to sell off sharply the following day. Will tomorrow make 5 out of 5? I put a little red line in the chart as I think the stock goes to around $15. Anytime management is talking about layoffs, core business segments under assault and closing of product groups, competition, etc, it is hard to see anyone paying a premium to own the equity. It is not a disaster. They make a lot of money and have a lot of cash. It is just really hard to move the top line when you are putting up $10B quarters and there are a lot of people attacking your success.
Side note…John said the word “compute” four times. That is four times more than he did in the last four quarterly calls combined. Was he reading my blog? Hi John if you are reading and do not forget to read that copy of my book I sent you.
** It is all about the network stupid, because it is all about compute. **