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Wednesday, May 6, 2009

Cisco 2Q:2009 results

Reports a nickel better on a negligible revenue beat.  Guides to down 17-20% – street is down 19%ish… so modestly better.  Commentary perhaps more important – customers saying they’re seeing a bottom and feeling better about stability… but that they’re at significantly lower levels.  Though this is a change from prior quarter commentaries that business was eroding and there was worldwide economic risk, it’s not exactly a shot across the bow of recovery.

Stock was up a buck on the # and has come back in to flat.  Call still ongoing.

Cisco ( $CSCO ) Cheat Sheet – 2Q:2009

Cisco reports tonight.  Here’s the quick and dirty consensus:






Income Statement










    Gross Margin (%)










    Operating Profit










    Pre-tax Profit





    Net Income





And an earnings preview (cribbed from an alert service):

Company is scheduled to report third quarter results tomorrow after the market closes. Reuters is $0.25/$8.13B; guidance was for a revenue decline of 15-20% y/y, implying a range of $7.83-8.32B. The Street is generally looking for an in-line quarter, though several previews note the potential for modest EPS upside even if the top line were to be light. Order trends will be a focus to see if the company has experienced the relative stability over the past 6-8 weeks that has been referenced by many tech peers throughout earnings season. Margins and expense controls will also be closely watched as the company is expected to have managed costs well in the muted demand environment. Consensus (10-15 estimates) for selected metrics:

  • Product revenue $6.46B
  • Services revenue $1.63B
  • Non-GAAP gross margin 63.2%; guidance was for 63%

As is typically the case, guidance and Chambers' comments that frame the outlook will likely dictate the market's reaction. Gauging expectations is more difficult than usual this quarter as while there are no calls for upside proper, several previews note that current consensus for a 2% sequential increase is very beatable heading into the strong fourth quarter; further, there were several out-quarter estimate bumps included in the deluge of previews. In sum, while upside is not necessarily "expected" in this environment, anything less than bracketing the consensus along with relatively constructive comments about the environment from Chambers may be viewed as a disappointment. Given CSCO's wide footprint, geographical breadth, Chambers' willingness to provide details and its spot at the front of April-reporting companies, tomorrow's call could potentially go a long way toward dictating tech sentiment over the near term.

I don’t like Cisco at 15* estimates of $1.25 for this year.  They’re shrinking and the stock is trading at the upper end of the company’s “12-15% long-term growth rate” guidance, which is total garbage too and needs to come down.  Very well managed company… likely to do a large acquisition at some point.  Too much of a macro buy tech kind of bet for me… which is probably exactly why its working.  Macro calls are driving this market.

I have an idea. Let's outsource toxic assets. ( $BAC $INFY $EEM #MARKET )

Outsourcing is going to get a lot more expensive in 2011 when Obama’s corporate tax expenditure changes kick in.  The cost of outsourcing ops will effectively double.  (

Several (and probably all) large multinational corporations have their operations structured to take advantage of the tax codes Obama is looking to abolish.  (

… will the administration wind up shifting the job losses to emerging nations?

Sources say Bank of America needs $33.9 billion in capital. ( That's funny, I could have sworn I saw Ken Lewis say they need none a week ago. The stock has had a 25% swing from trough to peak already this morning.

Tuesday, May 5, 2009

Roundup – May 5, 2009

DRAM contract prices ticked up 5% pretty much across the board for the first half of May.  No update was posted for NAND contract.  (  Due to spot cutbacks by Elpida and Powerchip, contract prices could rise 10-15% in aggregate for the month of May.  (

LCD contract prices were 2-5% higher for the first half of May.  Notebook panels in 14 and 15” and 17” monitor prices were at the higher end of these hikes, large form factor TVs were at the lower end.  (  Display product vendors are eyeing the higher prices and increased supply warily due to limited third quarter demand indications.  (

Intel’s Atom chipset, for the netbook segment, is selling very well in China.  Too well for Intel’s taste.  Chinese white box manufacturers have been stripping out features to break the $400-500 netbook price Intel and the industry would like to enjoy.  Two of Taiwan’s largest IC distributors estimate this month’s Atom supply will fall short by 500k units.  (

Yahoo and Microsoft continue to try to negotiate a mutually beneficial search agreement.  Progress has been “meaningful.”  (

When Sentinel Management, a $1.4 billion dollar hedge fund, lost $900 mil, it froze withdrawals and drew the scrutiny of the SEC.  They told investors they were buying liquid commercial paper when they were actually buying 30 year non-investment graded instruments.  Why?  The best seats in the house and lap dances.  (

This one goes to eleven:  spy photos of Amazon’s new Kindle.  For a limited time includes streaming live feed of dying newspapers.  (

10 out of 19 banks subjected to the stress test will need to raise more capital.  (

AIG has borrowed enough money to lose… for now.  (

Monday, May 4, 2009

Roundup – May 4, 2009 ( $RIMM $AAPL $AMZN $BRK.A $C $BAC $WFC #SEMIS #SOLAR )

Govt postpones stress test results till late Thurs afternoon.  FT reports Citi and BAC are plotting to raise 10 bil a piece and that Wells Fargo and PNC are appealing initial findings that they require capital raises.

Buffett said he applied his own stress tests to WFC and thinks they’re just fine.

Buffett also said Berkshire Hathaway is likely to lose money on their credit default contracts, though he remains hopeful he will make money on his massive portfolio of index puts sold short.

Amazon is expected to unveil a larger format Kindle at a press event on Wednesday at Pace University, the 19th century headquarters of the NY Times – as the source here is the NY Times, I’m guessing their facts are correct.  Industry watchers have this device pegged as tailored for large format print – newspapers.  Could see Amazon stock do better into the announcement but the device is unlikely to save the newspaper industry.

China sets a deadline of May 15th for BIPV subsidy applications at $2.93 per watt with minimum installation volume of 50kw per project.

iSuppli predicts netbook growth may end when the economy recovers.  This is a stupid theory – netbooks aren’t good primary computers but they’re great as a secondary.  If anything, an increase in disposable income or a surge in corporate spending is likely to strengthen netbook shipments, not shrink them.

The Blackberry Curve outsold the iPhone last quarter, according to NPD.  Keep in mind, these would be sales to consumers, not sales into the channel – cell phones are sold to carriers who in turn sell them to consumers.  RIMM has an analyst meeting tomorrow where they are expected to unveil the Verizon version of the Bold.  Two upgrades on Friday and Goldman throws RIMM on the conviction buy list this AM.

The Semiconductor Industry Association (SIA) reported sales jumped 3.3% m/m to $14.7 billion.  Sales were down 15.7% from the prior quarter and 29.9% from the prior year’s quarter.  Japan was the only worldwide region to contract in the period.  Sounds a lot better than it looks:


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