Cisco Systems (CSCO) +3.22%
Cisco reported a 27 percent drop in fiscal second-quarter earnings that exceeded estimates, but signaled that conditions had worsened.
Year-over-year order growth declined 9 percent in November and 11 percent in December, but deteriorated significantly in January, falling 20 percent. Approximately 80 percent of Cisco’s business is non-recurring each quarter, and thus is a reasonably good indicator of spending patterns. Using January’s numbers to construct revenue guidance for the coming quarter, the company projects a revenue drop of 15 percent to 20 percent from a year earlier.
Demand for routers and switches, which account for the majority of Cisco’s revenue, has dried up. Given AT&T’s and Verizon’s plans to reduce capital equipment spending in 2009, a rebound in carrier router demand should not be expected anytime soon. Longer term, however, router demand is primarily a function of network traffic growth, which is unlikely to subside. Similarly, enterprises are pushing out new equipment purchases, but they must eventually upgrade their networks to accommodate traffic growth.
In discussing the expected length of the economic downturn, CEO John Chambers said that the majority of Cisco’s customers are guessing 2010 while a smaller group sees the upturn toward the end of 2009. When asked for his opinion Chambers added, “I tend to be a little more optimistic than most of my customers.”
Cisco generated 3.2 billion in cash flows in the quarter, up from $2.4 billion in the same period a year ago and higher than the $2.7 billion in the company’s fiscal first quarter. With $29.5 billion in cash, Cisco sees the downturn as a chance to expand and has continued to move into new markets.
Cisco is also believed to be developing a server system that would take it into the computer business for the first time. Cisco will likely require an acquisition (I’m looking at you EMC) if they want to be real player in that competitive market.
Looking at the big picture, Cisco is very comfortable long-term growth goals of 12 to 17 percent due to “favorable long-term secular trends including cloud computing/data center build-outs, unified communications, web-based video and Telepresence.”
Harris Corporation (HRS) +0.98%
Harris revenue was up 16 percent in the second quarter of fiscal 2009 as strong international sales and healthy government contracts boosted results.
The company had strong growth in its military radio and government communications sectors. Second-quarter sales of military radios in the RF Communications segment were up 23 percent. International revenues made up 40 percent of RF Communications revenue, with orders from the Philippines, Mexico, Iraq, Algeria and Afghanistan.
Total orders in the second quarter were lower than expected because of delays of several large orders. On the bright side, no orders were lost or cancelled, “they just simply moved to the right.”
Contracts with the U.S. Census Bureau provided important revenue, as did multiband satellite communications terminals, avionics shipments for the F-35 Joint Strike Fighter program, an information technology services program for the Air Force Weather Agency and various classified programs.
Also during the second quarter, Harris completed the first phase for the U.S. Department of Health and Human Services' Nationwide Health Information Network. The software will allow federal agencies and regional health care providers to share information. It also positions Harris for growth.
Full-year, Harris is forecasting annual profit growth of 17 percent to 20 percent compared with last year and a revenue increase of 8 percent to 9 percent. CEO Howard Lance added, “We are well-positioned in the intelligence market, which ought to receive priority funding,” (from the government over tanks, planes, missiles, etc).
Wal-Mart Stores (WMT) +4.61%
Wal-Mart said January sales exceeded its projection after consumers bought more discounted groceries and $4 medicines. Same-store sales advanced 2.1 percent last month, beating Wal-Mart’s forecast of no change to a 2 percent increase. Same-store sales fell for the whole industry fell for the fourth straight month.
The company also announced they will provide quarterly sales guidance, rather than monthly guidance due to “volatile times when consumer swings are more difficult to predict.” During the period from January 31 through May 1, Wal-Mart projects an increase between one and three percent in U.S. same-stores sales excluding fuel.
Retailers continue to underperform and may continue to lag even on rebounds until there’s an anticipation of a bottom in housing prices.
Johnson Controls (JCI) +4.82%
Bloomberg reports that Ford Motor Co. selected Johnson Controls-Saft, a U.S.-French joint-venture, to supply batteries for a plug-in hybrid auto coming in 2012.
Johnson Controls-Saft, which makes batteries for Mercedes-Benz and BMW hybrids, will provide lithium-ion battery systems for a car that can get as much as 120 miles per gallon of fuel, Ford said in a statement. The car will have an electric range of 30 miles before a gasoline engine takes over.
In addition to the five-year deal they received on the Ford plug-in, Johnson Controls-Saft is also bidding on a contract to provide batteries for an all-electric Ford small car due in 2011.
These are key contracts for Johnson Controls battery business since they missed out on contract with GM and Toyota to supply their hybrid batteries.
Boeing (BA) 1.96%
Bloomberg reports that Boeing lost a $2.4 billion order for 16 Dreamliner 787 planes from Dubai-based leasing company LCAL, the second cancellation for the model in a week. Boeing has delayed the Dreamliner 787 introduction four times, but cancellations remain low. With 900 orders for the 787 and the eventual production rate of about ten a month, cancellations by smaller buyers who need more financing are not concerning to the long-term outlook for the company (or those who will supply parts like Goodrich).
eResearch Technology (ERES) +16.78%
Standard & Poor’s announced that eResearch Technology will join the S&P 600 small cap fund.
General Electric (GE) -3.73%
GE’s Immelt Prepared to Run Company with AA Rating
Chevron (CVX) +2.20%
Chevron Reports New Discovery Similar to Jack Field
Quick Hits
- In Merrill Deal, U.S. Played Hardball
- Goldman, JPM Won’t Feel Effects of Executive Salary Caps
- Lower Earnings, at Higher Prices
- Volcker Chafes at Obama Panel Delay, Strains With Summers Rise
Peter Lazaroff, Junior Analyst
No comments:
Post a Comment