Cisco shares fall following mixed Q1 financial results

Cisco shares fell 5 per cent in after hours trading due to the advisory that next quarter revenues may be lower than previously forecasted.

Cisco posted Q1 revenues of $12.7 billion, up more that 3 per cent from this time last year. However, despite these better that expected results, Cisco’s announcement that it expects sales in Q2 to fall below previous forecasts of 56C per share resulted in it trimming its forecast to a more likely 53C to 55C per share.

CEO Chuck Robbins said that sales order fell due to concerns regard the strong dollar but despite this, they had strong momentum moving into the second half of the year. Robbins confidence is due to Cisco’s belief that its new generation of switches – its single biggest product line, which accounts for 32 per cent of sales – will overtake the traditional switch product line and boost profits.

Furthermore, strategic alliances with Ericsson the mobile and telecommunication giant will provide Cisco with an entry into Ericsson’s home turf – telecommunications companies, such as Verizon, AT&T and Vodafone – in 180 countries and introduce Cisco into new markets. This is the third strategic partnership that Cisco has developed recently, Apple and Inspur in China being the others where Cisco was unable to readily launch a competitive product or acquire a company, so forming partnerships and joint ventures make good business sense.

Despite, Cisco’s 5 per cent fall in after hours trading, it still returned a gross margin, a strong KPI (key performance indicator) of profitability of 63.2 per cent, and with $59.1 billion in cash and short-term investments.