It's becoming a broken record of sorts: telecom equipment makers are suffering from the recession and draconian cutbacks in carrier capex. It is therefore no surprise that Cisco Systems (NASDAQ:CSCO, news, filings) is feeling the pain. The company reported a solid fiscal Q2, with revenues of $9.1B and earnings per share of $0.32 excluding certain charges. Neither number was huge, yet both were slightly stronger than expected.
But of course no earnings report this quarter is complete without some truly ugly projections, and like Juniper Networks (NASDAQ:JNPR, news, filings) last week, Cisco did not disappoint. Fiscal Q3 (ends in April) revenues were projected at $7.8-8.3B - a nice wide range and well below expectations. I think of it as a safety net, there's just no way any of these companies wants to be caught missing estimates each quarter if the recession deepens, so they are all trying to set expectations lower than the street. They don't have a clue what revenue and earnings will be, and neither do analysts right now, it's just too dark and stormy outside.
CEO John Chambers did make an ominous statement:
We intend to accelerate the alignment of our resources to prioritize future growth opportunities, gradually decrease our operating expenses, while building even stronger customer relationships to position Cisco for ongoing, long-term market leadership.
Translation? Reorganization and layoffs are on the menu, although that isn't surprising either.
On the other hand, Akamai's results yesterday imply that bandwidth growth remains strong. As long as that trend doesn't break, then the carrier capex pullback must ease at some point.
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