Reading headlines alone, one might wonder if two headlines from today on Cisco were from the same quarter.

Bloomberg reports Cisco Misses Estimates on Sluggish Corporate Spending

Meanwhile, the Wall Street Journal reports Cisco Profit Jumps 79%

Cisco Systems Inc. said fiscal fourth-quarter profit jumped 79% on rebounding revenue, although margins slid for the second consecutive quarter.

In a call with investors, he said he expects the current quarter’s sales should rise 18% to 20% over a year ago as he warned that a return to normal economic conditions would take longer than previously expected. Wall Street forecast a 21% gain in the quarter’s revenue.

Mr. Chambers said that the term “unusual uncertainty” was an accurate way to describe the current environment, noting that customers have exercised “an unusual amount of conservatism and caution.” Cisco’s significant reach into the guts of many businesses make it a good proxy for broader corporate spending.

Revenue jumped 27% to $10.84 billion. In May, the company projected sales would increase 25% to 28% from a year ago.

Analysts’ latest estimates were earnings of 42 cents a share on revenue of $10.88 billion, according to Thomson Reuters.

Gross margin declined to 62.7% from 64%.

Sales increased 31% for the company’s products segment, which makes up a bulk of Cisco’s revenue, while service sales were up 12%.

Priced For Perfection

Frequently it’s not the news that matters, it’s the market’s reaction to it. In this case Cisco is getting hit pretty hard after hours.

Across the board, stocks are priced for perfection. And when stocks are priced for perfection, small slips matter. Expect to see more stock market reactions like this on any miss, even when profits are up 79%.

Mike “Mish” Shedlock
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