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Something Is Very Wrong With This Picture
Just because very few actually understood the severity of the Cisco earnings guidance, in which the company forecast an 8-10% drop (let's call it 9%) in quarterly revenues when Wall Street was expecting a 4% increase, we have compiled and presented in chart form the historical and projected quarterly revenue data for CSCO to show today's preannouncement in all its gruesome context.
A few points:
- The current quarter, in which revenues missed expectations of $12.4 billion by $300 million, while bad, was still a year-over-year increase of 1.8%.
- It is the next quarter that is a true stunner because while Goldman Sachs (which has the company at a Conviction Buy rating with a $30 price target) was expecting a print of $12.9 billion, taking the midline of CSCO's guide-down, Cisco now expects to make a paltry $11 billion, the lowest amount since early 2011, which would make the next quarter, ending January 2014, the biggest miss to expectations in company history.
- In sequential terms, the drop in revenue next quarter would amount to just over $1 billion, a topline crash second only to the $1.2 billion sequential collapse in the quarter when Lehman filed and the modern financial system as we know it nearly ended.
- There is simply no way that the company will be able to grow into its current projected revenue growth range as this quarter will mean a dramatic change to the topline trendline
And while another massive buyback is just what the adjusted EPS doctor ordered, should CSCO experience just one more quarter such as the forecast, things will get very ugly not just for revenue, which it is quite obvious is no longer growing anywhere, but for the bottom line.
In short: while the markets may not represent it, because the markets stopped reflecting reality some time in 2009, something is suddenly seriously broken not only with the global demand picture, but the entire world economy as well.
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I have a buddy that works in sales for Oracle...he said first half of season was good for industry but that things have dried up in the last 6 weeks or so.
because of the shutdown?
There is nothing wrong with anything equity or bond "markets" related that a good doubling or tripling of the daily/monthly/yearly dosage of QE can't paper over (literally).
Electronic Fiat debt produced for nothing, and corporate buybacks for essentially free (just ignore the debt side of the ledger and all is more than fine).
That ain't real GDP growth, that's the way you do it
Electronic key-stroked fiat debt for nothing, and nominal asset appreciation for free
When will they launch the "Lite" versions without the backdoor entry point?
Note in particular the "Goldman Forecast" slope.
Little wonder why Lloyd is always laughing.
http://3.bp.blogspot.com/-_Xq18RwtujA/TgMz8cwTYNI/AAAAAAAAAVk/7WQ3n1bX4k...
Haha, Chambers, how are those "market adjacencies" treating you now? Did you make more enemies than win business? WTF did you think would happen? Has your hubris receeded back to mere mortal status now that your strategy has blown up in your face? Does Padma blow you at executive workshops?
Well yes, Tyler. but they are still making money. That's more than we can say for Amazon, or Twatter, or any of the big banks if we had honest accounting and marked to market.
Can't argue with the scope of the disaster. It's just one more Crazy Coyote moment in time. I haven't been able to value anything sensibly since 08. The end of this will not be pretty.
When the USSA becomes the American Federation of Independent States, and it isn't a euphemism.
(reply to philipat)
Maybe Chairsatan will direct Cisco to cram a handful of free Bennie Bucks into every router Cisco sells. That should stimulate their sales activity...
FedFUBAR.
OK, I am now free to sell stocks tomorrow, finally.
Mañana, pecez!
When Co's guide with honesty....it might be time to bail....or they just want to buy in lower....who the fuck knows anymore after 5 years of complete utter bullshit.....ahh
Shutdown? Er, no.
NSA, yes.
The zero-heads will spin this to shit, but the facts are in,
CISCO is fucked cuz the asian sales have plummeted,
WHY? Because of the NSA
Enough said,
Everybody in ASIA and EUROPE has been told, quit using USA HW & SW,...
It will take time, but today CISCO is just a bellwether.
It's the little NSA surprise in every Cisco router.
So at the same time BHO is destroying heathcare....
His friends at NSA have destroyed the HW/SW biz in the USA.
This cat is a genius.
I wish i could find fault with your analysis. Just imagine how much harm obama could do if he had a clue about how the world works and the same malice for our country and way of life.
If you must try to pin the tail, it goes on Bush. These plans were put in place before we even knew who Obama was. Get real.....it was the un-patriotic Patriot Act that sealed our fate, a wonderful gift from the ultra-paranoid chicken hawk neo-cons.
I have a buddy in IT. His company chose Ubiquiti Networks over Cisco. Don't overlook the possibility that CSCO is simply getting beaten in the marketplace.
Add up revenue for the big players in a segment to see if their market is shrinking, or just their market share.
Our company swapped out all cisco for brocade.
Plus with news about CSCO being in bed with NSA....not going to go well with their customers outside of the US...
N
S
A
Who in their right mind wants to buy NSA products? If it's American, it's a spy gadget.
It is too early to tell, but after a robust July-September things slowed noticeably in October and November in our business in Seattle. Maybe it is the Obamacare thing and people are waiting to see how this manifests.
Q4 GDP, which we will not know until early 2014 could be a surprise. Look for signs from the PTB that all is not well, expect efforts to talk up the economy etc.
This is the best Christmas season in 11 months! /s
sschu
I work in that space and can confirm your buddy's statement emphatically. Not only new opportunities, but future pipeline has been decimated over the same period.
/ES hitting ATH on the CSCO ER. As expected (like IBM), it's company specific, is the spin. Rally on!
It's not the fall, but the sudden stop that will kill Cisco.
Might be true, but the fall seems to be doing some extraordinary damage! Imagine the upcoming SPLAT.
Boy...that escalated quickly. I mean...that realy got out of hand fast.
+100 for the Ron Burgandy reference. You should find yourself a safehouse, or a relative close by.
http://www.youtube.com/watch?v=cDfQo1ANeLM
"unexpected"
Cisco is not the bellwether it once was; nor Gold the safe haven.
More like bell curve, amirite? (Cisco, that is. Measuring gold in fiat is a fool's game.)
Right, thousands of years of gold as a store of value are now meaningless because the dollar is, well, the dollar, and it's American, and we're number 1, so the dollar is exceptional because of American exceptionalism, and can't ever be replaced, because it's the best, because it's ours and we're the best, so our fiat is better than any other fiat, which all went to zero, because we're better than anyone else ... right?
GOLD has 10K years + as a store of value, problem is where do you bury it, ?
USD has varied history of say 140 years post civil-war,
BITCOIN has a PONZI history of just a few years,....
GOLD will never go down,
It could take years for the USD to die
BTC could evaporate tomorrow,
History repeats,
Still safer than digits on a screen under the care of insolvent banks.
Nothing a little Crisco won't solve.
Better hurry, Obummer's gonna outlaw that shit!
Jim Sinclair had an interesting thought. He believed there would be no seizure of IRA/401K's or gold, but they would impose a windfall profit tax.
99.9% ?
Rickards has been saying that for a while.
Are you saying in addition to Sinclair?
They just need to change up the marketing pitch.
"Fine American routers, backdoors for the NSA installed free."
Meanwhile DELL and HPQ battling out for the crap
Sales for Apple must not be going well. Black Friday ads have 5s for $99, iPhone 4 for $1, $199 old iPads, $300 off Macbooks.
Best Buy must have made a deal with Microsoft for some of the $2 billion worth of unsold Surface RT tablets. Those can be had for $199.
It's not just Apple. Lenovo has been offering some hella discounts as well, as much as $500 on some systems.
Time to kick CSCO out of the DOW also...
Yep...got to keep that 'survivorship bias' (that no one ever seems to notice) rolling along.
Can you say "Thank you, NSA"?
Thanks you for making American technology something oly a foreign fool would buy for anything critical. This is just the beginning for U.S. tech stocks. Most of our friends, and none of our enemies, want to invest in Trojan Horses.
Cisco stopped recruiting white people over a decade ago. Its no surprise that they're going down now.
nailed it.
A lot of the H1Bs that worked for me when I worked at Honda had spent a stint at Cisco. Load em up and crank them through....
It kills me that while I would recommend engineering as an entry level degree, maybe even a masters(it trains people to think). But with US technical so biased toward foreign engineers, I could not recommend engineering as a place for a native US kid to aspire to. They should place something on top of the engineering degree....
The telecom equipment sector (which is directly applicable to most of Cisco's business) has spent much of the past decade in meltdown, yet Cisco could only see fit to fill most of its staffing needs with foreigners. This is a sign of a very poorly managed business.
Everybody quit hiring 'white folks' back in the 1980's,
Have you ever noticed that most of the kid's teaching on the EDU stanford/mit forums are 'asian'.
In the 1990's most company's moved development to ASIA ( india, china ), so employment doesn't really matter,
Hell even the DOD quit hiring 'white people' to do tech work post 911,
Let's be 100% honest here, most white people have double digit IQ's or less.
Silicon Valley was dominated by white males in the late 1990s. Very little useful has been invented or has come to market since then. Meanwhile over a million H-1B's, mainly from one country, India, have displaced untold numbers of domestic STEM grads (of all races).
thats not entirely true.
the indians, only hire other indians.
ive seen it happen in a few companies. once one of them gets the job of hiring, they begin to replace the entire workforce.
That is exactly true. They have a network and even a pecking order in that network.
I know many executives that have now figured it out that some Indians say they know something and then get on linkedin and ask their network how to do something, sometimes entry level.
In some ways it is impressive that they use tools this impressively. In other ways a lie is still, and always will be, a lie.
withdrawn
Asshat Chambers blamed the shutdown and debt ceiling debate as "exacerbating" a lack of confidence on the call today. Because of course it was the shutdown and not the last 5 years of overpromised and underdelivered hope and change for the low info masses, you dumbfuck. Jeezuz, get Calderoni up there for at least some fresh air. Chambers has doubled his compensation from "meh, pretty good" to "fuck yeah!" during the great QE pump. Did he ever sell his Via Feliz in Los Altos? Now I wonder if CSCO is in even worse trouble than even the guidance suggests. Have to have someone start watching traffic from Building 10 and see if the new cars roll in or not.
Wouldn't have something to do with this now would it?
http://www.newsmax.com/Newsfront/nsa-spying-risks-billions/2013/09/10/id...
...
“The National Security Agency will kill the U.S. technology industry singlehandedly,” Rob Enderle, a technology analyst in San Jose, California, said in an interview. “These companies may be just dealing with the difficulty in meeting our numbers through the end of the decade.”
...
Cisco Systems Inc., the world’s biggest networking equipment maker, received 42 percent of its $46.1 billion in fiscal 2012 revenue from outside the U.S., according to data compiled by Bloomberg. Symantec Corp., the biggest maker of computer-security software based in Mountain View, California, reported 46 percent of its fiscal 2013 revenue of $6.9 billion from markets other than the U.S., Canada and Latin America.
...
http://www.networkworld.com/news/2013/101713-cisco-nsa-backdoor-274965.html
Controversial crypto technology known as Dual EC DRBG, thought to be a backdoor for the National Security Agency, ended up in some Cisco products as part of its code libraries. But Cisco says they cannot be used because it chose another crypto as an operational default which can't be changed.
Dual EC DRBG or Dual Elliptic Curve Deterministic Random Bit Generator (Dual EC DRBG) from the National Institute of Standards and Technology and a crypto toolkit from RSA is thought to have been one main way the crypto ended up in hundreds of vendors’ products.
...
Suuuuuuure it can't on both accounts. The check is also in the mail.
DCH
You forgot to mention that "extra port" that's been on some of the biggest chassis' they carry for too many years now but never seems to get mentioned...
Only a devastating EMP attack can wallpaper over this mess.
if bitcoin goes mainstream, i wouldn't count it out
i wouldnt count on that ever happening.
recall the story of vhs vs beta.
GAAP net income is around $2B/quarter. A $15B stock buyback means that roughly 7.5 quarters of income will be spent on stock buybacks. Cisco has already spent large amounts on buybacks this year and in 2012, yet shares outstanding are up compared to September 2011.
The company is spending a huge part of its so-called income to repurchase shares given to management and employees. Why would anyone want to own this turkey?
None of this should be surprising at all to those who visit this site on a regular basis and know anything about Cisco Systems.
Actually I'm kinda of surprised these type of forecasts didn't start becoming a more frequent occurrence with the "cutting corners" that has been part of Chambers platform since he headed the Company and the myriad of problems it has faced with IOS code releases that consistently break due to poor quality control and the fact that it faces increasing stiff competition both at home and abroad.
However I'll throw Cisco a bone.
You know America is an evil place to do business when your own Government puts an Asian routing and switching concern on the GS list for contracts in 2005 when that very same company was in a Palo Alto court room 2 years earlier for reverse engineering Cisco's OS and was allowed to sell there "iron" to the GSA and DoD.
What is left now for the U.S. Gov to fuck up? It doesn't seem like there is much left to destroy. Now we get to watch all the blow back happen in front of our eyes.
I call that my barometer before diving in to this market!
One way to evaluate these tech company earnings is to look at Book Value per share.
They all generally report good earnings.
Then you look at book Value per share and it goes down. Where the heck did the money go? They spent a lot of cash buying back shares to reduce the options exercise dilution. all that has happened is that all earnings have been used to prop up share price to keep the options from becomming worthless. stockholders never get even a saint sight of any cash.
Dell is another example of that tactic.
Major problem is Cisco is a commodity product. In fact all computer tech, as much as Silicon Valley hates to admit it is becomming a commodity stock. The guidance is dependant on backwards trending. If you call up Cisco IR, they themselves will tell you their purchasing guidance is based on backward looking cycle trends. Their contract's have no fucking clue what happens 2 years out, let alone 6 months out unless the purchases are prepaid Corp Contracts. Nobody does prepaid racks anymore, its all PayGo.
Nobody needs to update routers every 3 years unless one breaks. Unless the internet suddenly has a huge jump in net traffic, it's about as relevant to forward economic growth as telephone poles. Hell, oil pipelines have higher growth profiles right now than corporate IT deployment cycle costs.
The only problem with this narrative is that America has just spent the last 30 years retooling itself to be a service & tech driven economy. Who wants to tell Johnny5 from MIT he needs to retrain to become a pipeline engineer for dirty oil vs. living in LA in a tech startup loft ? How about suggesting Jill5 has to become a biochemist because the world does not need 10,000 Deloitte consultants all pitching to each other ?
Given Tech's zero risk cost, infinite scalability (circa 1988) and global deployment potential independent of local resource endowments, Tech was seen as the Pancreas to all the worlds economic problems. Now ? Not so much.
Sun, Cisco, Seagate.... all will likely be conglomerate SBU's in 15 years similar to the Lenovo fabrication corps at the moment.
"Tech was seen as the Pancreas to all the worlds economic problems."
Pancreas?
I think he means panacea !
+1 for reading and writing ability :-)
Also SUN already has been gobbled up...
Yeah, it helps ya digest all that raw data! :>D
CISCO was a commodity product 20+ years ago,
Problem is the 'back-door' NSA stuff, and the newer technology that turns every wifi router remotely into a 3-d imaging device to see into your home or office, ... endless fucking shit, and the world isn't going to pay for it,
It's not so much the BIG-STUFF that hurts just like the STUTNEXT virus in all SIEMENS hardware, but the commodity 'linksys' (cisco) has been pervasive NSA spyware for years, but now that the gubmints know, they want to do it themselves,
Why the fuck not?
New technology from the NSA allows any passive WIFI router to become a passive 3d radar device that see's water, aka water balloons, aka 'human tissue', where its at, where its moving, and how it moves within a house or office.
They're even working on 'fingerprinting' the water balloons, so that they can know when your in the toilet, and who is using the toilet and for how long.
So why in the fuck would every fucking country in the world only let the USA have this info?
The USA is fucked, ... nobody will buy their technology, now.
Cisco is used as a precursor for the economy, in general.
Things are positioning themselves for a really big crash.....
Also wonder if the NSA had a share in this upcoming mess, as well?
Huawei for Cisco!!!!
NSA SPYING has resulted in Cancellation All ASIAN orders of Cisco Routers.
Cisco is the worlds leading producer of 'routers', problem is the NSA has deep microcode in the firmware that 'routes' just about everything to NSA listening stations, and of course there are 'backdoors' in all the routers that allow 'remote control'.
Given this the entire world has QUIT BUYING USA electronics, so CISCO plummets WHO COULD HAVE GUESSED?
If that scenario is true then Snowden's claim to fame may include ushering in the collapse. Love to have a history book from 2112 about now.
SNOWDEN is really just a minion in this show,... many before SNOWDEN outed the NSA, ... its just that SNOWDEN had the best PR in history, I mean his first VIDEO in HK, it was elegant and choreographed, like someone had spent 6 months coaching him,
We'll never know the truth, ...
But one essential truth we know, ... most want to take down the USA, ... I remember being involved in politics in the 1980's in the States, and working deeply with PUG's ( cuz I was pro-gun NRA ), and I remember in meetings that they said that in order to 'fix' the USA you first had to destroy it,
I think the higher DEM's feel the same, ... its all about reset and all out pillage, and everybody thinks they'll win,
Just another reason why I bailed the USA 10+ years ago, ...cuz you don't want to be around when the CIVIL-WAR begins, ... but its wanted by most.
But SNOWDEN is not even BIG, probably wikileaks did more, but even that has ties to AIPAC, ...
Think of it this way? In who's interest is it to destroy USA technology? I think ISRAEL stands to profit by being the last man standing and taking the USA competition out.
If you look closely at all the wiki/snowden releases in the past 5-10 years, very few have touched Israel, most have targeted the USA and asia.
***
My premise is many want to destroy the USA, on all sides. For various reasons, nobody is happy with the current situation.
But SNOWDEN was too well created and marketed to have done this alone with just a shitty little UK newspaper, incredible power in media is behind the snowden slow-release.
Not a fucking thing snowden has said, has surprised any of US tech people, who have known all along about what is capable.
....and after CSCO's management lobbied heavily in D.C. to permit immigrant employees to come on board, they will next be announcing some very major layoffs....
Let's see, we let the Jap's bomb Hawaii, then we interned Jap's in the USA ( and stole their assets ),
Then we gave the asian's a trojan horse at their expense, and they rejected said 'trojan', and then we send them to FEMA camps in the USA?
Possible? Most likely.
Where might the next battle lines be drawn?
Germany/CHINA/RUSSIA axis, versus Israel/USA/UK/FRANCE/SAUDI
Certainly the only correct 'reset' is a NEW Bretton-Woods, but that first requires a WAR to take out the 'good money', as uncle sam however much like GOLUM, can't have anybody credible around at the next Bretton-Wood's ( post WWIII ).
I really do liken the FUTURE ( NEW WORLD ORDER ) to be much like the DARK-AGES.
cisco routers suck ass
I just bought a stack of switches today. Netgear switches. Cisco product is overpriced by 250%.
Burning cash with a stock buyback is a death spiral. That money needs to go into R&D to advance their product technology to justify higher prices and to advance their factory technology to drive down manufacturing costs.
Shutdown? Govt shutdown???
Be the best damn thing that could happen for everyone if we could permanently shut down %90 of gvt including one private company the Federal Reserve.
Never happen though, gonna take starvation-disease and death to bring any intelligent reform in a country controlled and populated by nuts.
same as ibm(?) in china
cisco is the hardware that drives the nets that nsa listens on.
so everyone is looking for anything but cisco to connect machinex.
meh, dont worry about CSCO being down. people are just pulling their money from CSCO to put it into a more profitable and stable companies, the real bellwethers, the titans of industry, like Facebook, Tesla, and Twitter.
but those companies have never made a profit you say... irrelevant!
what about declining demand? you say.. irrelevant! declining employment? irrelevant! declining earnings? irrelevant!
the only thing that matters is will the FED keep printing money? the answer is an unequivocal yes; reaffirmed today by yellen. hinting at an increase in QE, that is all you need to know, stop looking at charts, corporate reports, probabilities, risk profiles, press releases, the macro picture or whatever else. none of it matter at all as long as the FED is at our backs just keep buying, buy the dip, buy the highs, buy in-between. if the day ends in a y then that means buy! just buy them anywhere. even if they go against you for a couple days; in a week or so you will be up money so dont worry, you cant lose.
well somebody has to profit on the way down, no?
The revenge of Snowden strikes again.
Oracle, and the rest of these corporate criminal tech companies like Microsoft, Google, and Apple are all going to take big hits as all of these European countries turn away from US spyware and start using alternative, non-NSA infiltrated software and hardware.
Funny how entire other countries don't like to be spied on by foreigners. And now these scumbags and their stock prices are going to feel the pain. Beautiful.
Down with tyranny.
Vive Snowden
The NSA spied, technology died! More government sponsored job creation as an unintended consequence.