Cisco Systems, Inc. Earnings The Good And The Bad

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Cisco Systems, Inc. (NASDAQ:CSCO) released its latest earnings report last night, and the results were mixed. However, they were good enough to please many investors, and analysts are weighing in on the good and the bad in that report.

The good in Cisco Systems’ earnings results

In his report dated Nov. 13, 2014, BMO Capital Markets analyst Tim Long note that the company’s October quarter results beat Wall Street’s estimates, coming in at $12.25 billion, compared to his estimate of $12.18 billion and the consensus estimate of $12.16 billion. Earnings per share were 54 cents, compared to his estimate and the consensus estimate of 52 cents.

He said sales of the company’s switches were strong as Cisco ramped its new products quickly, causing them to more than offset weakness in the SP video and data center businesses. He called the company’s gross margins “very impressive,” noting that the product margins of 62.5% were the highest they have been since mid-2011. Cisco management cited better productivity and seasonality.

The analyst also liked how well Cisco did in the public sector vertical, as the company reported a 13% year over year increase in global orders. Growth in the U.S. was 22%, including 34% growth from U.S. federal customers.

The bad in Cisco Systems’ earnings

On the negative side, Long said that Cisco Systems management reported weak trends in their service providers business and also emerging markets. They said weakness in these areas was why the guidance they provided was weak.

In service providers, orders fall 10% year over year, including an 18% decline just in the U.S. The company’s management made similar comments as other telco equipment vendors and said that they don’t expect a recovery soon.

The comments were similar for business in emerging markets, and orders also declined in this area. Management did see some positive signs that improvement may be on the horizon, however, particularly in non-BRIC and Mexico.

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