added to the stock market’s malaise on Wednesday, providing disappointing guidance for its fiscal first quarter ending in October. The miss on the company’s outlook is likely to intensify concerns about slowing spending on enterprise technology infrastructure, which could put added pressure on tech-stock prices.
Results for the fiscal fourth quarter ended July 27 were basically in line with guidance. The networking giant (ticker: CSCO) posted revenue of $13.43 billion, up 5% from a year earlier and toward the low end of the company’s guidance range for an increase of 4.5% to 6.5%. Non-GAAP profit in the quarter was 83 cents a share, a penny above the top-end of the guidance range of 80 cents to 82 cents. For the full year, revenue was $51.7 billion, up 7%.
But guidance for the first quarter didn’t meet expectations. Cisco sees revenue for the quarter flat to up 2% compared with a year earlier, which implies a range of $3.1 billion to $3.36 billion, below the Street consensus at $3.4 billion. Cisco sees non-GAAP profit of 80 cents to 82 cents a share for the quarter, below consensus at 83 cents.
Cisco said revenue for the quarter was up 9% in the Americas and 7% in Europe, the Middle East and Africa (EMEA), but down 4% in Asia Pacific, Japan and China. The company saw 14% growth in Security, 11% in Applications and 6% in Infrastructure Platforms.
Cisco said orders in the quarter were flat year over year, reflecting an 8% drop in Asia Pacific, partially offset by a 1% increase in the Americas and a 4% improvement in EMEA. In what would appear to be direct fallout from the U.S. trade dispute, the company saw a 25% drop in revenue in China in the quarter, and the company said it is being disinvited from bidding on some projects. Cisco said orders were down 2% year over year for the enterprise sector, and down 21% for the service provider segment.
In a statement, CEO Chuck Robbins said the results “marked a strong end to a great year.” He said the company is “executing well in a dynamic environment, delivering tremendous innovation across our portfolio and extending our market leadership.”
Cisco CFO Kelly Kramer said in an interview that the company continues to see soft demand from the service provider segment as telcos begin their 5G build-outs by focusing on the radio side of their infrastructure, where Cisco doesn’t play. She says Cisco will benefit once the carriers upgrade their core networks to handle expanded traffic, but she doesn’t see that happening until 2021 and beyond.
Kelly says Cisco is feeling the impact from the uncertain trade landscape, but that the real issue is not demand in China but instead customers slowing decision making on new purchases. “That’s what happens when there’s uncertainty,” she said. “If the geo and macro things can sort themselves out, everything else is going right for us.”
China, while still declining in double-digits, is less than 3% on total revenue and not really a factor in the company’s guidance for the October quarter, she adds.
Kelly also noted that the company has now completed a $31 billion share repurchase program announced 18 months ago following a tax holiday on cash repatriation. At the time, Cisco had about $74 billion in cash on its balance sheet, and $39 billion in debt. She says that after completing the buyback—actually $32.6 billion—Cisco’s restructured balance sheet has $33 billion in cash and $25 billion in debt. Going forward, she adds, the company will return to its policy of returning 50% of cash flow to holders through buybacks and dividends.
Still, Kramer added in a statement that the company is “pleased with our solid execution and performance in [the fourth quarter].”
The market seems less than pleased.
Cisco, which fell $2.11, or 4%, to $50.61 in Wednesday’s regular session, was down $3.67, or 7.25%, to $46.94 in after-hours trading. The
Nasdaq Composite Index
closed down 3%, while the
Dow Jones Industrial Average
Write to Eric J. Savitz at firstname.lastname@example.org