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Why Cisco Systems Shares plummeted Thursday



What happened

Shares of the network equipment giant Cisco systems (NASDAQ: CSCO) fell sharply on Thursday morning. An earnings report was undoubtedly ruined by weak guidance for the next fiscal quarter, and Cisco shares traded 11.3% lower at 10:45 a.m. EDT.

So what

Cisco’s fourth-quarter revenue fell 9% year-on-year to $ 12.2 billion. Earnings are revised down 4% to $ 0.80 / diluted share. Analysts consensus was calling for earnings of almost $ 0.74 per share with sales of around $ 12.1 billion, so Cisco cleared those bars for some vacancy. .

The first quarter guidance targets were less impressive. Revenue is expected to drop about 1

0% again, stopping at $ 11.9 billion. Adjusted earnings are projected to be around $ 0.70 per share, down from $ 0.84 per share over the previous year period. Here, your average analyst looked for earnings of almost $ 0.76 per share on about $ 12.2 billion in top-notch sales.

A man bent his head to the ground, gripping a disconnected network cable.

Photo source: Getty Images.

So what now

Cisco has hit a number of long-term goals in fiscal 2020. More than half of its total revenue comes from software and services this year, reducing the importance of hardware sales to yield margins. lower profit. And 78% of Cisco’s software revenue is collected in the form of subscription contracts, exceeding its management goal of 66%. The company is modernizing its business model towards operations with higher margins and more predictable revenue streams.

That said, the first quarter guidance targets were low due to the impact of COVID-19, due to the difficulty of comparing with the unusually strong results of the previous year.

CFO Kelly Kramer said: “So compared to Q1 of ’20 right now, we still have some tougher comparisons. But they get easier as this year continues, with assume that the pandemic is over, “CFO Kelly Kramer said during Cisco’s fourth-quarter earnings call. “Our forecast is based on what we see, based on order rates and we feel this is a pretty accurate guide.”

Kramer also chose this time to retire from his position as CFO, limited to an eight-year term. However, Cisco would not be left without a financial leader. Kramer will stay until the company finds a suitable replacement and will also help her successor speed up before leaving.




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