Investopedia: Cisco - No Growth Today, Try Again Tomorrow

Value investors have a tough time with tech; the good, growing companies are often far too expensive, and the value-priced companies struggle to grow their businesses. Cisco (Nasdaq:CSCO) is a good case in point - the company looks cheap by many metrics, but most tech investors have washed their hands of this name until the company proves that it can shore up its switching and routing businesses, and find new growth opportunities.


A Mediocre Fiscal Third Quarter
Arguably the best that can be said about Cisco's fiscal third quarter is that it was not any worse than most people expected. Revenue rose almost 5% from the year-ago level to $10.87 billion, basically matching the averaged analyst guess. Within the top line figure, product revenue rose almost 3%, with switching down almost 10% year-on-year, routing rising more than 7%, and new product revenue growing about 15%. On a sequential basis, a different pattern emerges - switching was up a bit less than 5%, routing was up better than 11%, and new products were up a bit below 2%.

Profitability continues to be an issue. GAAP gross margin fell 260 basis points, though product gross margin rose almost four full points. Operating income fell 7% and operating margin contracted by 250 basis points. Though the non-GAAP figures are different, directionally they were the same. Although CSCO did not disappoint on the non-GAAP per-share earnings number, guidance for the fourth quarter revenue number was quite weak and that is likely to dominate a lot of discussion of this stock. 



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