Cisco's Next Quarter Won't Look This Good: Fool by Numbers
By Anders Bylund
February 7, 2008
On Feb. 6, Cisco Systems (Nasdaq: CSCO) released second-quarter earnings for the period ended Jan. 26.
- Companies with quarterly sales that compare favorably to the gross domestic product of Jamaica or Albania have the luxury to plan for the long term. A deal here and a miss there just don't move that weighty financial needle very far.
- That said, management saw fewer incoming orders in January than it would have liked, which will hamstring the next quarter's shipped-and-paid sales a bit. Expectations are for 10% revenue growth from the last Q3, rather than the steady 16% results we've seen lately.
- Cisco's margins shrank a bit this time, both from last year and sequentially. It looks like the culprits are increased R&D spending, which is OK by this Fool, and higher administrative expenses, which isn't quite as cool.
(Figures in millions, except per-share data)
Income Statement Highlights
|
Q2 2008
|
Q2 2007
|
Change
|
|
Sales
|
$9,831
|
$8,439
|
16.5%
|
|
Net Profit
|
$2,060
|
$1,921
|
7.2%
|
|
EPS
|
$0.33
|
$0.31
|
6.5%
|
|
Diluted Shares
|
6,202
|
6,291
|
(1.4%)
|
Get back to basics with the income statement.
Margin Checkup
|
Q2 2008
|
Q2 2007
|
Change*
|
|
Gross Margin
|
64.5%
|
63.9%
|
0.6
|
|
Operating Margin
|
24.5%
|
25.2%
|
(0.7)
|
|
Net Margin
|
21.0%
|
22.8%
|
(1.8)
|
*Expressed in percentage points.
Margins are the earnings engine.
Balance Sheet Highlights
|
Assets
|
Q2 2008
|
Q2 2007
|
Change
|
|
Cash + ST Invest.
|
$22,693
|
$20,681
|
9.7%
|
|
Accounts Rec.
|
$4,165
|
$3,267
|
27.5%
|
|
Inventory
|
$1,267
|
$1,642
|
(22.8%)
|
|
Liabilities
|
Q2 2008
|
Q2 2007
|
Change
|
|
Accounts Payable
|
$763
|
$931
|
(18.0%)
|
|
Long-Term Debt
|
$6,851
|
$6,416
|
6.8%
|
The balance sheet reflects the company's health.
Cash Flow Highlights
|
Q2 2008
|
Q2 2007
|
Change
|
|
Cash From Ops.
|
$2,443
|
$2,658
|
(8.1%)
|
|
Capital Expenditures
|
$295
|
$334
|
(11.7%)
|
|
Free Cash Flow
|
$2,148
|
$2,324
|
(7.6%)
|
|
Owner Earnings
|
$2,222
|
$1,929
|
15.2%
|
Free cash flow is a Fool's best friend.
Competitive Context
|
Market Cap
|
Trailing P/E Ratio
|
CAPS Rating
|
|
International Business Machines (NYSE: IBM)
|
$141,930
|
14.2
|
***
|
|
Cisco
|
$141,118
|
17.5
|
****
|
|
Nokia (NYSE: NOK)
|
$137,540
|
18.0
|
****
|
|
Motorola (NYSE: MOT)
|
$26,320
|
N/A
|
**
|
|
Nortel Networks (NYSE: NT)
|
$4,910
|
N/A
|
*
|
Using the latest reported numbers from Capital IQ.
Keep your partners close and the competition in your vest pocket.
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