Cisco 1Q14 Earnings Call Summary

On Wednesday, Cisco Systems CSCO had its first quarter 2014 Earnings Call. Investors were unhappy after Earnings release despite beating the EPS street estimate and an increase in sales. Earnings Summary:

• Cisco had record non-GAAP earnings per share of $0.53, up 10 percent YoY.
• Total revenue was $12.1 billion, a growth of 2 percent YoY.
• The company generated $2.6 billion in operating cash flow and returned $3 billion to shareholders through the buyback and dividend.
• In the last two quarters, Cisco's order growth rate in emerging countries went from +13 percent (3Q13) to -12 percent (1Q14).
• Total product revenue from a geographic perspective grew 4 percent for the Americas, 3 percent for EMEA, and decreased 9 percent for APJC.
• Security revenues grew 8 percent with network security up 12 percent.
• The board granted a new share repurchase authorization of $15 billion.
• Cisco expects 2Q14 sales to decline 8-10 percent. Earnings are expected to be between $0.45-$0.47, below the current analyst consensus estimate of $0.52.

Conference Call Highlights:

• Cisco Chairman and CEO John Chambers commented, "Our intermediate and long-term strategic view has not changed, and we are continuing to lean forward and make investments that will drive our future growth. We are disrupting markets. Look at our Application Centric Infrastructure launch, Internet of Things World Forum, and our NCS [Network Convergence System] launch in just the last month to drive value to our customers and to our shareholders. From where I sit, I believe we are well positioned at the center of the long-term transitions shaping the communications and IT markets."
• Frank Calderi, Cisco executive Vice President and CFO, noted, "In this quarter, we continued to execute consistently with our portfolio approach to acquisitions aligned to driving long-term returns. We announced the WHIPTAIL acquisition to accelerate our UCS strategy. WHIPTAIL is the market leader in high-performance scalable solid-state memory systems. And we also closed two acquisitions this quarter, Composite Software and Sourcefire."
• Chamber spoke regarding Cisco's organization structure adding, "We're not going to change the organization structures that we have. We are organizing business entities with what works fine. But we are going to change in terms of having a couple key leaders go across the whole company, just like we did in enterprise with Chuck Robbins and Rob Soderbery with myself and Pankaj [Patel] flying cover, help them to prioritize resources throughout that segment of the market. And we'll apply the resources to where areas that we had not moved as much resources, especially since now we've done a good job at the high-end core to other segments."
• John Chambers further analyzed the weakness of emerging markets, "Across every geography, the impact of emerging markets weakness was pronounced and accelerated through the back end of the quarter. Our top five emerging markets declined 21 percent, with Brazil down 25 percent, Mexico down 18 percent, India down 18 percent, China down 18 percent, and Russia down 30 percent."

Cisco closed at $24.00 on Wednesday and shares are currently trading -12.04 percent.