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Cisco CFO is not yet ready to call a bottom in its business

·Anchor, Editor-at-Large
·3-min read
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Cisco (CSCO) is going to need a few more encouraging quarters under its belt before it’s ready to call a bottom in its business.

Makes sense given the challenges Corporate America is dealing with during the COVID-19 pandemic, which has led many companies to slash investment in the long-lasting goods provided by Cisco.

“I’m definitely not comfortable calling a bottom,” Cisco CFO Kelly Kramer said on Yahoo Finance’s The First Trade.

Kramer added, “I wish I could. I would say it’s very dynamic still. I think it comes down to how the economy rebounds. If companies start to come back online and there isn’t a second wave [of infections], and we just continue and the economy bounces back, that would be great. But I think there is always a high likelihood that there is a second wave coming and that will cause I think a lot of up and down. So I think this can be very dynamic for the new few quarters.”

BARCELONA, SPAIN - FEBRUARY 26: CISCO logo  is seen during GSMA MWC 2019. The MWC2019 Mobile World Congress on February 26, 2019 in Barcelona, Spain. (Photo by Miquel Benitez/Getty Images)
BARCELONA, SPAIN - FEBRUARY 26: CISCO logo is seen during GSMA MWC 2019. The MWC2019 Mobile World Congress on February 26, 2019 in Barcelona, Spain. (Photo by Miquel Benitez/Getty Images)

On Wednesday evening, Cisco reported third-fiscal quarter sales declined 8% year-over-year. Sales in the second fiscal quarter dropped 4%. By geographic region, sales fell 8% in the Americas, 7% in Europe and 9% in Asia Pacific — all worse growth rates than the second quarter.

But Cisco’s sales and earnings did smash Wall Street profit forecasts. The company saw strong momentum in its online meeting platform Webex due to the shift to work from home during the pandemic and security products. Profit margins were boosted by favorable component pricing.

Those dynamics and a better than expected outlook for fourth fiscal quarter profits sent Cisco shares up 5% on Thursday.

Wall Street came out mixed on Cisco shares after the results, however.

“While FQ3 results were better than expected, largely as the company saw strength in March from business continuity/WFH investments, April slowed meaningfully, with SMBs and impacted industries already curtailing spend,” said Morgan Stanley analyst Meta Marshall.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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