Cisco Systems Inc (NASDAQ: CSCO) reported its third fiscal quarter that ended in April, unlike most recent earnings report that reflected results throughout only March. There's no doubt, Cisco felt the turbulence alright. There was a piece of good news due to video conferencing along with being slightly ahead of Wall Street projections, shares rose 2% following the results on Wednesday.
Q3 Earnings Report
Revenue of $12 billion fell 8% year-over-year which is the company's worst decline in six years. And the midpoint of its forecast for the next quarter represents an even bigger drop of 9.5%—the worst in more than a decade. But at least both the latest revenue and the forecast ended up being more optimistic than Wall Street. Per-share adjusted earnings of 79 cents confidently exceeded analyst estimates of 71 cents. And the bright side, the closely watched service, and security segments achieved revenue growth in the quarter. As expected, due to imposed-lockdown measures, there was increased usage of WebEx videoconferencing service, an early entrant in the category now popularized by Zoom Video Communications Inc (NASDAQ: ZM).
COVID-19 has emphasized already weak spots
Cisco didn't exactly enter the pandemic from a position of strength as it was already dealing with a broad-based slowdown that affected its results during the last couple of quarters. The pandemic has only worsened things further. Hewlett Packard Enterprise Company (NYSE: HPE) is also expected a decline in earnings as a result of lower revenues for its quarter that also ended in April but we will need to wait until May 21st to be able to compare the impact of COVID-19. Supply chain disruptions back in March were surely beyond bad news as HP was counting on a PC market turnaround.
And then there is Dell (NYSE: DELL) which will report a week later on its own quest to reach the holy grail of profitability. At least, Dell as well as Lenovo (OTC: LNVGY) both expanded their market shares. Despite the severe disruption, at least they can all look forward that working from home is set to become a permanent feature – they just need to find a way to produce enough to meet the demand!
Outlook – medal for bravery!
The fact that Cisco was willing to give forecasts is worthy of praise. Most companies have pulled their guidelines and are tiptoeing in an effort to avoid issuing any forecasts. The only brave ones are the businesses that have benefited from the pandemic or from subscription-based software companies that already secured their revenue for this turbulent year. Moreover, consider that Cisco is typically conservative with its projections, the fact that it came out with estimates and despite fairly pessimistic projections, this clearly reflects the company's confidence that won't be going further South. Considering the span and dynamics of this pandemic, Cisco deserves a pat on the back for that!
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