The sound out of Cisco (CSCO) has been so fine for so long that its was an assault to hear that the company would have a drop in revenue in the current quarter. By the reckoning of management, it could be as much as 10%.
Because Cisco has a wide spread of products from video conferencing to routers to cable set top boxes and does as much business overseas as in the US, the company is sending out a signal to shareholders at other firms as diverse and Microsoft (MSFT) and Oracle (ORCL).
For the quarter just over, Cisco had an 8% improvement in revenue to $10.3 billion. Net income was fairly flat at $2.2 billion.
Cisco’s products did not used to touch the consumer directly, and that may be part of its problem. Its lower-level video conferencing is used by tens of thousand of businesses. Its set top boxes are in millions of homes.
Enterprise router sales are moving down because cable and telecom companies do no fell they have the capex to push out infrastructure improvements in a recession. But, Verizon (VZ) has a better balance sheet than the man with the satellite TV who just lost his job. Verizon will spend to put broadband into homes because it knows that it is a good long-term bet and one it can afford.
Cisco may look back and see that getting into consumer electronics was a bad move.
Douglas A. McIntyre