It’s not enough.

After all the breast-beating from Cisco Systems (CSCO) CEO John Chambers about the need for the company to restore credibility and refocus the company, investors get a decision to close the Flip video camera business and cut 550—about 1%–of the company’s employees?

This isn’t the major change that investors were hoping for. If you’ve been holding the stock in the hope that Cisco would announce a major reorganization that would address falling profit margins and increasing competition in its core businesses, it’s time to admit that current Cisco’s management just doesn’t get it. Take the loss and sell.

In his April 4 memo to the company’s employees CEO Chambers said that he would make several “targeted moves” to address Cisco’s problems. those problems include an acquisition strategy that saw Cisco start construction on too many new businesses—many of which had lower profit margins than its core routing and switching business.

The most obvious target in any reorganization was the company’s consumer business with such products as the Flip video camera and Linksys home routing gear. The Flip got a lot of well-deserved attention as a key sign of how badly off track the company was: Why invest in a stand alone video camera in a world when more and more consumers use their cell phones for video?

Today’s moves are barely a ripple on Cisco’s ocean of problems needing a fix. Read more

Update Cisco Systems (CSCO)

Nothing like confirming investors’ worries about the profitability of your company’s business strategy. Investors have been worried that in its pursuit of growth—a daunting task to begin with for a company that dominates its core markets and with a market cap of $104 billion—that Cisco Systems (CSCO) was trying to expand  in too many directions and that would eventually hurt profit margins. By its own count Cisco has moved into more than 30 new businesses.

Well, guess what. In the quarter that ended on January 29 (the second quarter of Cisco’s fiscal year), and that Cisco reported on February 10, the company posted a gross margin of 62.4% that was short of the 63.3% consensus among Wall Street analysts and the 64.5% gross margin in the same quarter a year ago.

Part of the lower margin story was completely explicable and shouldn’t raise any doubts among investors. In its core Ethernet switch business Cisco is rolling out new products and new products always start out with lower margins. The spending on new products here is a sign that Cisco is determined to defend this core market—good—but that it is facing strong new aggressively priced products from competitors such as Juniper Networks (JNPR) and Brocade (BRCD)—bad. But okay, this is the typical product cycle story in a technology market. Research and development costs climbed 19% percent in the quarter.

But part of the lower margin story suggests that Cisco’s basic growth strategy requires not fine-tuning but a complete overhaul. Read more

Update Cisco Systems (CSCO)

Can Cisco Systems (CSCO) stage a comeback?

At first (and probably second and third glances too) that seems a ludicrous question. We’re talking Cisco here. The gorilla so big that other gorillas make room in the bamboo.

But Cisco’s results for the first quarter of fiscal 2011, announced on November 10, have raised that question.

Here’s why—and why the question isn’t foolish.

Cisco reported solid growth for the quarter (19.2%) but a drop in gross margin to 62.8% from 65.3% in the first quarter of fiscal 2010 raised an eyebrow or two. Despite that, the company managed to report earnings of 37 cents a share for the quarter. That was 2 cents a share above analyst expectations.

And then the company raised more eyebrows. Read more

Update Cisco Systems (CSCO)

When I was a kid and I’d turn up my turn up my nose at a great present that wasn’t exactly what I wanted, my grandmother would say, What do you want, egg in your beer?

Well, today, May 13, investors in Cisco Systems (CSCO) remind me of that little kid I was. They’ve sold off shares of Cisco Systems by a little more than 4% today because in earnings for the company’s fiscal third quarter announced after the market closed yesterday the company only reported the strongest quarter in company history (said CEO John Chambers) and didn’t raise guidance for the next quarter.

Mind you, Cisco didn’t cut guidance. On the conference call the company said revenue for the next quarter, the company’s fiscal fourth quarter, would be up 25% to 28% from the fourth quarter a year earlier. That works out to revenue of $10.6 to $10.9 billion. Exactly in line with the $10.68 that Wall Street analysts had projected.

And that’s the big disappointment? Got to be since I can’t find one in the rest of Cisco’s numbers. Read more

Update Cisco Systems (CSCO)

The recession is certainly over for Cisco Systems (CSCO). Today, February 3, after the market close the company reported earnings for the quarter that ended in January (Cisco’s second quarter of fiscal 2010) of 40 cents a share. That was 5 cents a share better than Wall Street projections.

Tech stocks had already finished strong for the day before Cisco reported. The positive surprise could be enough to keep what was one of the weakest sectors in January on the mend. (For more on the January slide in the technology sector and what it means for the market as a whole see my post http://jubakpicks.com/2010/01/28/odds-that-this-is-a-10-correction-and-not-just-5-rise-as-tech-stocks-sink/ )

Chances are pretty good since unlike a lot of tech companies that have followed great earnings reports with disappointing guidance, Cisco raised projections for the next quarter in its conference call. Read more