Cisco’s fiscal first quarter earnings report came out yesterday after the markets closed, with both good and not-so-good news for the markets. Of course, getting a bit of both sides is nearly always the case with companies as large as this.
Revenues of $12.68B were up 3.6% over the same quarter last year, while non-GAAP earnings per share of $0.59 were up 9.3%. Both were better than the $12.65B and $0.56 that analysts had been projecting. A drop in core router sales of 8% was offset by a rise in core switch sales.
However, guidance of revenue growth of 0-2% and earnings per share of $0.53-0.55 were not nearly as good news to the markets, which had been hoping for something a bit more rosy, like 5% growth and $0.56 per share. Cisco based those projections on slower Q1 order growth that it blames on headwinds from “the uncertainty of the macro environment and currency impacts”.
Most are interpreting that as the effects of weakness in the Chinese market where Cisco has been investing a lot of its energy lately. With entities as large as Cisco, vast and largely untapped markets like China are really the only place they can find opportunities that can bring relevant growth. So they have been doubling down on the region over the last year or two, making that deal with Inspur earlier this autumn, for instance. But doing so also exposes them to the vicissitudes of the Chinese macro environment, which isn’t quite what it used to be.
Cisco also recently announced a big alliance with Ericsson to help its international growth prospects, but the effects of that are still beyond the horizon of prediction.
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