Cisco Profit Falls 24% on Spending Slowdown
Cisco Systems Inc. said Wednesday that its fiscal second-quarter profit fell 24% because of the communications spending slowdown. But the results were almost twice what analysts had expected as the company signaled that spending by some of its large corporate customers may have hit bottom.
Cisco, the largest maker of equipment that powers the Internet, said earnings before special items fell to $664 million, or 9 cents a share, from $1.3 billion, or 18 cents, in the year-earlier quarter.
Analysts had expected Cisco to report earnings of 5 cents, with a range of 5 cents to 7 cents, according to Thomson Financial/First Call.
Revenue in the quarter ended Jan. 26 fell 29% to $4.8 billion, but far exceeded analysts’ forecasts of $4.55 billion.
Cisco jumped the gun on much of its second-quarter surprise because of an e-mail sent late Tuesday by an executive to some employees telling them what the company would report. The company issued an announcement early in the day that its results would surpass Wall Street expectations, without giving details.
Cisco said the e-mail to the employees was sent inadvertently by an executive it did not identify.
Under the Securities and Exchange Commission’s Regulation Fair Disclosure rule approved two years ago, companies are barred from first telling stock analysts, big investors and other individuals about company events, giving them time to trade before smaller stockholders get the news.
Shares of Cisco rose in after hours trade to $19.31 but then dropped to $17.22. The stock had closed up 11 cents at $18.61 on Nasdaq before the earnings report was released. Chief Executive John Chambers said on a conference call that orders weren’t coming in as fast as Cisco was shipping products. Third-quarter revenue will be unchanged or rise by a “very low single-digit” percentage from the previous period, Chief Financial Officer Larry Carter said.
“We still have limited visibility over the short term,” Chambers said, citing “conservatism” in customers’ hiring and computer-equipment budgets. “Traditionally the third quarter has been a seasonally challenging one for Cisco.”
Cisco said last November that second-quarter sales would be flat to up in the single-digit percentage point range from the $4.45 billion posted in the first quarter.
Net income for the quarter including one-time items was $660million, or 9 cents a share, down from $874million, or 12 cents, a year ago.
Other earnings, excluding one-time items, include:
* Allstate Corp. said fourth-quarter operating profit fell 36% to $379 million, or 53 cents a share, better than the 46 cents analysts expected. The results exclude one-time costs for restructuring, a lawsuit settlement with Georgia policyholders and other items.
* Cendant Corp. said fourth-quarter earnings from operations grew 39% to $232 million, or 23 cents a share, exceeding analysts’ forecasts of 21 cents, aided by its mortgage and travel service businesses and by recent acquisitions. Revenue more than doubled to $2.58 billion from $1.17 billion.
* PepsiCo Inc. reported a 16% rise in fourth-quarter profit to $764million, or 42 cents a share, boosted by newer drinks such as Aquafina bottled water and its core snack brands. The results, which exclude such special items as costs associated with the acquisition of Quaker Oats, met Wall Street estimates. Revenue edged up 1.5% to $7.99 billion, as sales of Gatorade fell slightly amid “intense competitive pressure.”
* Sonicblue Inc. reported an operating loss of $6.8 million, or 7 cents a share, beating forecasts of a 9-cent loss, as it continued a transformation from graphics chips to digital audio and video devices for consumers. Revenue was down 20% from a year ago to $79.6 million, but was up from the previous quarter and substantially higher than the $58 million Wall Street expected.
