This summary is based on the first quarter fiscal 2008 earnings call conducted by Cisco Systems, Inc. (CSCO) on November 7, 2007.
Management:
Chairman, CEO: John Chambers
CFO: Dennis Powell
IR: Blair Christie
EVP, Worldwide Operations and Business Development: Rick Justice
CDO: Charlie Giancarlo
SVP, Business Development: Ned Hooper
SVP, Customer Solutions, Finance: Frank Calderoni
CEO, Scientific-Atlanta: Jim McDonnell
Key Investors Issues
- EPS were 35 cents a share compared to 26 cents a share last year.
- Net income was $2.2 billion compared to $1.6 billion a year ago.
- Sales were $9.55 billion compared to $8.18 billion for the same period last year.
Second Quarter Highlights
Total revenue was approximately $9.6 billion, a 17% year-over-year increase which was comfortably above guidance of 16%.
- Order growth was solid with product book to bill at approximately 1.
- Product orders grew approximately 16%.
Non-GAAP net income was $2.5 billion, an increase year over year of 31%.
- GAAP net income was $2.2 billion, representing a 37% increase year over year.
- Non-GAAP earnings per share were 40 cents per share and GAAP earnings per share were 35 cents, which represented increases of 29% and 35% respectively year over year.
- Cash generated from operations was $3.1 billion.
- The company repurchased $3 billion of common stock and it exited the quarter with $24.7 billion in cash, cash equivalents and investments as compared to of $22.3 billion in the fourth quarter.
- Revenue and order growth rates from key products including services were strong across almost all categories.
- Routing revenues grew year over year by 18%.
- Switching revenues grew year over year by 8%
- The total of all of Advanced Technologies revenues grew year over year by approximately 27%.
- Advanced Technologies revenues contribution to the top line is now greater than 20% larger than revenue contributed from routing products.
The company continues to achieve unique product balance, both in terms of breadth and depth of product portfolio.
- The company has ten product families with order and revenue run rates above $1 billion, and almost all of them continue to gain market share in their respective product categories.
- To add additional information regarding the balance of revenues across product lines and potential future momentum, 14 of top 20 product families had year-over-year revenue growth of 15% or better.
- Service revenue represents approximately 16% of total revenue.
- Revenues for services grew year over year by approximately 24%. This is strong revenue growth rate for a $6 billion run rate business, with non-GAAP gross margins of approximately 65%.
From a geographic perspective, order momentum was strong and balance was good across four large theaters with year-over-year order growth rates from 13% to mid-30%.
- Europe continued to be strong for Cisco, with growth accelerating year over year to approximately 20%. Emerging markets, which tends to be lumpy, grew in the mid- 30%.
- Asia Pacific continued to be solid and grew in the high-teens followed by the U.S. with growth of approximately 13%.
- From a customer segment perspective, the company saw a solid balance across commercial markets, service provider and enterprise segments.
- The global commercial markets segment remained most steady and predictable segment, with growth of approximately 25% year over year.
The global service provider business remained strong.
- Orders from a service provider perspective grew in the high teens.
- Video continues to drive service provider network demand and is potentially the killer application for loading and bringing value to the network.
- From an enterprise and commercial perspective, the company expects that global video implementations such as IP TV, TelePresence, Unified Communications, business security and other video applications will provide future network loads, and therefore, will also require upgrades to existing networks.
- Using Cisco as an aggressive example, as the company begins to implement Unified Communications, TelePresence, and other video applications across entire company, expectation for network load is actually increasing from what was set as last quarter''s projection of 200% to 300% year-over-year growth is now expected to be closer to 400% over the next several years.
- One of the best indications of an industry''s anticipated load on networks is order growth rate in high end routers.
- While the company had strong order growth rate in high end routers during the first three quarters of last fiscal year 2007, which averaged approximately 20% year over year, the company experienced solid growth in the fourth quarter of approximately 30% year over year. - Order growth was in the mid-30%.
- The global enterprise business, which includes public sector, was solid. Enterprise customer segment on a global basis grew in the low double-digits.
Total non-GAAP gross margin was 65.6%, up from 65.2% last quarter.
