After the close of business yesterday, Cisco announced financial results for FY2020 and 2020Q4.  Results were OK.  But the guidance was surprisingly bad. 

For 2020Q4, revenue was $12.2 billion, a decrease of 9% year over year, while earnings per share (GAAP) were $0.62 or a 22% increase year over year.

For FY2020, revenue was $49.3 billion, a decrease of 5% year over year, while earnings per share (GAAP) were $2.64, a 1% increase year over year.

Overall, considering Covid-19, the results were not bad – probably better than expected.  The problem is that they are guiding for a further 9 to 11% revenue decline for Q1.  No one was expecting that!  The Cisco’s shared plunged 11% on the news.

As with CEOs of most major companies, this one found the positive aspect:

“By the end of fiscal 2020, we achieved our goal of more than half of our revenue coming from software and services, and this strategy continues to resonate with customers as they digitize their organizations. Throughout fiscal 2020, Cisco has demonstrated operational resilience based on our strong customer relationships, solid financial foundation, and differentiated innovation,” said Chuck Robbins, chairman and CEO of Cisco. “As we focus on the future, we are rebalancing our R&D investments to focus on new areas so we can continue to offer customers the best, most relevant technology in simpler, more easily consumable ways.”

Cisco is making efforts to realign their sales thrust into more renewable areas:

“We executed well in Q4, delivering strong margins despite the very challenging environment,” said Kelly Kramer, CFO of Cisco. “Software subscriptions now make up 78% of our software revenue and remaining performance obligations continued to grow strongly in the quarter, reflecting the strength of our portfolio of software and services.  We are seeing the returns on our investments in innovation as we focus on delivering long term growth and shareholder value.”

Is there a positive spin on the Cisco results?  Overall, with more people working from home during Covid, you expect that there would be an increased demand for high-speed internet, and hence hopefully, hardware to route that internet traffic.  But when guiding for a further 9% revenue decline, it seems that Cisco is not expecting any Covid dividends.

For more information on Cisco’s financial announcement, see https://newsroom.cisco.com/press-release-content?type=webcontent&articleId=2091061

TruePulse buys and sell Central Office telecommunication equipment such as Cisco Systems, Ciena, Fujikura and Omnitron.