Markets around the world seemed to be waiting with bated breath for Cisco's announcement this week of its second quarter results, and when the figures came in just a touch shy of analysts' forecasts, the markets reacted badly. The networking giant turned in earnings per share of 18 US cents where the analysts had forecast 19 cents, and NASDAQ cut Cisco's share price 16 per cent to $US30. Even worse, NASDAQ tumbled to a new 52-week low.
In fact, Cisco lifted profit 48 per cent from $US897 million a year ago to $US1.33 billion, on revenue that jumped 55 per cent from $US4.36 billion to $US6.75 billion. The company absorbed a one-off charge of $US237 million associated with acquisitions, which dragged net profit down to $US874 million, but it was the tone of the performance announcement rather than the numbers it contained that set the market on its downward trend. "Overall we view the results as mixed," explained John Chambers, Cisco's CEO. "There were challenges, primarily with the US service provider business". The company has also seen a softening of its enterprise business, mainly with customers involved in the manufacturing sector.
Outside the US Cisco's business continues to be rosy, with strong growth for orders in Asia; Europe, the Middle East and Africa; and Japan, Chambers said. "We are especially optimistic about India and China," Chambers added. "We believe India will be an instant replay of our success in China." However, with revenue from the US market slipping from 52 per cent to 49 per cent of the company's total revenue, Chambers was moved to note that "the next several quarters will be challenging".
Services giant EDS lifted revenue 14 per cent from $US4.9 billion to $US5.2 billion in the fourth quarter of 2000. Net profit for the quarter rocketed from $US42.7 million a year ago to $US321.4 million, and the company's executives were positive about EDS's future prospects. "EDS is winning business around the world at a record pace and enters 2001 with a backlog of signed business now approaching $US80 billion," claimed CEO Dick Brown. "Recognising the challenges of the global economy we're confident in our ability to execute on an ongoing basis."
CSC also fared well from the services market in its third quarter to December 29 when it lifted revenue 13 per cent to $US2.7 billion and raised profit before special items 10 per cent to $US122.9 million. Net profit was $US65.6 million after accounting for the restructuring of CSC's global financial services activities in the wake of the takeover of Mynd Corporation. Van Honeycutt, CSC's CEO, attributed the growth primarily to the company's performance in the US federal government market and its strength in commercial outsourcing.
Netegrity, a company that provides solutions for secure management of e-business, lifted revenue 355 per cent from $US4.7 million to $US21.5 million in its fourth quarter to December 31. A loss of $US3.4 million a year ago was converted into a net profit of $US2.9 million.
Network Appliance, which specialises in network file storage and content delivery, lifted revenue 91 per cent from $US151.3 million to $US288.4 million in its third quarter to January 26. Net profit jumped from $US19.8 million to $US34.1 million. "Storage is a strategic IT investment and remains a priority for today's leading corporations," noted CEO Dan Warmenhoven. "We are clearly encouraged by the enterprise penetration of our new high-end systems."