(Ed.: I wanted to clarify that issues external to security
vulnerabilities and advanced technology most definitely caused the impact and commentary
noted here -- global economic dynamics nothwithstanding, I'm just
surprised at the lack of chatter around the ol' Blogosphere on this)
From the "I meant to comment on this last week" Department...
A couple of weeks ago, analyst reports announced that Cisco was indicating a general slow-down of their enterprise business and they were placing pressure on the service provider business units to make up the difference. Furthermore, deep discounts to the channel and partners were crafted in order to incentivize Q2 customer purchases:
Cisco is headed for a disappointing quarter, according to a cautionary research note issued Monday from a research analyst, reports Barron's Online.
Samuel Wilson, an analyst at JMP Securities writes that the slow down in U.S. enterprise business during Cisco's fiscal second quarter has continued into its current quarter, according to Barron's.
According to the Barron's story: "Wilson writes that 'according to resellers, top Cisco sales staff have recently expressed concerns about making their April quarter numbers.” He says that the company has apparently increased “partner-focused incentives' designed to shift business in from the July quarter. 'Based on the past three months, many resellers now believe that U.S. enterprises have begun to delay discretionary spending above and beyond normal seasonality typical of the [calendar] first quarter.'
Wilson also wrote that Cisco has cut headcount and expenses in its enterprsie switching business unit. He forecasts Cisco's fiscal third quarter revenue to be $38.1 billion, down from the consensus estimates of $39.4 billion, according to Barron's.
Given how Cisco is a bellweather stock for not only IT but in many case an indicator of overall enterprise spend trends, why isn't there more concern in the air? Maybe it's just rumor and innuendo, but when analysts start press releases about Mr. Chambers' neighborhood, they're usually pretty conservative.
Rothman practically needed a Wet-Nap when he commented on Cisco's Q1 announcement (Cisco Takes it to the Next Level) but nary a word from the "All things including the kitchen sink will go into a Cat65K" camp on this news? What, no gleeful prognostication on rebounds or doom?
Interestingly, from here, Goldman advises to buy ahead of Q3 announcement:
We believe that management will put concerns around slower U.S. large cap tech spending to rest. It represents only 13% of sales and we believe is seeing indications of a rebound. We believe management is likely to reaffirm positive longer-term trends in emerging markets, new technologies and the impact of video on networks as key drivers of sustained double-digit top-line growth.
We'll see. Focusing on all the advanced technology projects and not focusing on core competencies can bite a company -- even Cisco -- when they least expect it. Couple that with the continued vulnerabilities in their security products (another one today across Pix/ASA) and I'd say folks might start talking...
I wonder how the security products have weathered through all this?
...but that's just me. Lash away, boys.
/Hoff