On Nov. 7, networking giant Cisco Systems (NASDAQ:CSCO) released first-quarter 2008 earnings for the period ended Oct. 27, 2007.

  • You may have noticed that Cisco's stock price dropped more than 6% this morning, erasing approximately over $10 billion of its market cap. Whatever the reason, the company beat sales and earnings estimates. Pro forma EPS was $0.40 vs. the $0.36 target, so these numbers can't be blamed.
  • Seen another way, the drop canceled about three months' worth of gains.
  • Cisco widened every important margin, and all cash flows were fatter than the GAAP net profit.
  • The share count was just about the only thing moving in the wrong direction. Cisco took on a tiny bit more debt, too, but the cash balance increase easily makes up for that.

(Figures in millions, except per-share data)

Income Statement Highlights

Q1 2008

Q1 2007

Change

Sales

$9,554

$8,184

16.7%

Net Profit

$2,205

$1,608

37.1%

EPS

$0.35

$0.26

34.6%

Diluted Shares

6,330

6,199

2.1%

Get back to basics with the income statement.

Margin Checkup

Q1 2008

Q1 2007

Change*

Gross Margin

64.6%

63.9%

0.7

Operating Margin

24.8%

24.3%

0.5

Net Margin

23.1%

19.7%

3.4

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets

Q1 2008

Q1 2007

Change

Cash + ST Invest.

$24,679

$19,520

26.4%

Accounts Rec.

$3,418

$3,417

0%

Inventory

$1,315

$1,477

(11%)

Liabilities

Q1 2008

Q1 2007

Change

Accounts Payable

$820

$869

(5.6%)

Long-Term Debt

$6,582

$6,455

2%

The balance sheet reflects the company's health.

Cash Flow Highlights

Q1 2008

Q1 2007

Change

Cash From Ops.

$3,089

$2,271

36%

Capital Expenditures

$296

$214

38.3%

Free Cash Flow

$2,793

$2,057

35.8%

Owner Earnings

$2,330

$1,742

33.8%

Free cash flow is a Fool's best friend.

Competitive Context

Market Cap

Trailing P/E Ratio

CAPS Rating

Cisco

$188,630

26.4

*****

Nokia (NYSE:NOK)

$156,220

16.7

*****

Juniper Networks (NASDAQ:JNPR)

$16,970

61.9

***

Nortel Networks (NYSE:NT)

$8,120

NM

*

CIENA (NASDAQ:CIEN)

$4,000

64.8

***

Using the latest reported numbers from Capital IQ, a division of Standard & Poor's.

Keep your partners close and the competition in your vest pocket.

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Fool contributor Anders Bylund had no position in any company mentioned, and he rarely cooks with Crisco. Oh, networks? Not shortening? Never mind, then. Fool rules are here.