Feeds

Cisco's Borg-like acquisition spree may be curtailed

Suffers profit and revenue shortfall

  • alert
  • submit to reddit

Bridging the IT gap between rising business demands and ageing tools

Cisco has missed its second quarter profit and revenue forecasts.

The networking giant also trimmed expectations for its next quarter and predicted sales then be down five per cent on its revenues this quarter, which would mark the first time its revenues have declined between quarters in its 11 years as a publicly traded company.

A slowdown in US economy and reorganisation amongst US service providers, a key market for Cisco's high-end routers, have hit its revenues far more than it first predicted.

Similar reasons forced rivals 3Com, Lucent Technologies and Foundry Networks to issue profit warnings in December, and Cisco's results show it isn't as insulated from a general networking market slowdown as was first supposed.

Excluding costs for acquisitions and other charges, Cisco's profit for the quarter was $1.33 billion on sales of $6.75 billion, far short of earlier estimates of $7.13 billion. Cisco's actual net income for the second quarter of fiscal 2001 was $874 million.

Cisco's chief financial officer told analysts in a conference call that the networking giant's revenue for its next quarter will be "flat to down 5 per cent". Sales in the fourth quarter are also expected to be pegged at around the same level.

Overall 2001 revenues for Cisco are now forecast to grow by about 40 percent instead of 55 per cent, equating to revenues of about $26.5 billion for Cisco's fiscal year which ends in July.

Cisco is known for consistently surpassing expectations and the disappointing figures have sent shock waves through the technology sector and caused its shares to fall from $35.75 to $33 in after hours trading.

It should be noted in all the gloom that Cisco's sales of $6.75 billion were up 55 per cent on the same quarter last year, and that it is, for all its detractors, a well run business with a strong product portfolio and enviable customer base.

However Cisco faces challenges on financial front that might affect it even more than prevailing market conditions.

Cisco's acquisitions are made mostly by pooling, using its shares to buy target companies (normally start-ups). The imminent ending of pooling of interests as accounting practice in the US could severely curtail Cisco's Borg-like tendencies to acquire firms with promising technologies. ®

Related stories:
IT giants who don't pay tax part 1: how Cisco does it
href="http://www.theregister.co.uk/content/7/16637.html">Why you should quit your job and work for Microsoft
Cisco woe as HP's Fiorina joins board
Lucent to restate sales and cut 10,000 jobs
Cisco looks rosy, 3Com peaky
Foundry issues second profit warning

The Power of One Brief: Top reasons to choose HP BladeSystem

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.