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.
Earnings per share came in at 42 cents a share, after excluding non-recurring items. That was 3 cents a share above Wall Street estimates. Revenue climbed by 27% from a year earlier to $10.37 billion. Wall Street was looking for $10.24 billion.
And the future looks pretty good. CEO Chambers—Did I mentioned that he called this the strongest quarter in the company’s history?—reported that the company picked up market share in both switching and routing, two of the company’s core markets, during the global downturn. In the quarter Cisco grew switching sales by 40% from the third quarter of fiscal 2009 and grew sales of routers by 25%.
I commented a while back in lamenting Qualcomm’s (QCOM) erratic earnings and revenue guidance that companies have character. Cisco’s long-time CEO isn’t a boaster. He’s, in fact, reliably conservative. As solid as Cisco’s numbers were in this report, the odds are that Chambers was conservative in talking about the future. There’s a lot of pent up demand for Cisco’s products in networking and the Internet. (For my you want to buy companies with pent up demand and some other examples see my post https://jubakpicks.com/2010/04/20/go-for-the-growth-and-where-to-find-it-at-a-reasonable-price/ )
If you don’t own Cisco System, I’d certainly consider buying on the current weakness. I certainly don’t see any reason in this news to sell.
As of May 13, I’m raising my target price for Cisco Systems to $32 a share by November from my earlier target of $29 by June.
Full disclosure: I own shares of Cisco Systems in my personal portfolio. (And can anyone tell me why anyone would want egg in their beer? Whenever I asked my grandmother looked at me like the answer was totally obvious.)
I plan on filing for benefits when i’m 62 as i don’t care about this stuff regarding lower benefit by collecting early. I want the money while i can still enjoy it.
amtrend,
You do realize that every penny you put into SS since 1961 has already been spent? So the only way to pay you the benefits you’ve “earned” is to take it from a young worker who may need that money now?
Elections have consequences. Every federal legislator/executive you have voted for since you were young took your money and spent it. Now you want the government to pay you back with money taken from other workers?
At some point the ponzi scheme ends, but you don’t want to be the one left standing when the music stops? Good luck with that, and forgive me if I don’t think you’ve “earned” anything. You voted for the people who taxed you (FICA) and you voted for the people who spent your money. So now you’ve made your bed, but you don’t want to sleep in it?
To be brutally honest, when I retire 20 years from now (God willing), I don’t expect to collect SS. At best, I may get some small check that will be worthless after inflation is considered. I have absolutely no sympathy whatsoever for anyone collecting SS now (unless they TRULY need the money).
I agree with andante. A system isn’t welfare if you paid for it, and if SS was used for what was originally intended, that is exactly what it would be. You pay into the system during your working life time, and they return that money in retirement. This is no more welfare then a IRA or a 401K.
What is welfare is when they allow people that have not put a dime to collect. Or what is the misappropriation of money where you put it in the general fund to make it look like your deficit is less then it is, or spend it on other things it wasn’t intended for.
This isn’t to say that the other things like death benefits shouldn’t have been funded, they just should have not been lumped into SS, so that they could stand on their own.
I guess I’m saying I don’t like the way SS is run (surprise it is run by the government/politicians), but its isn’t welfare to give retires THEIR MONEY that was always meant for them, whether or not if they a “rich” or not.
If you were to put money in annuity all your life, and then you get to retirement and it is suppose to pay out, would you stand for the company to say “we are not going to pay you what we owe you because we mismanaged your money, and besides we see you have enough money without it”.
The elderly are paid SS benefits based on the number of years they worked and how much they paid into the system. If the beneficiaries of SS had taken the money they paid in SS taxes and just invested them in US Treasuries, they would be getting much more money than the subpoverty benefits currently being paid out. But our government didn’t invest the money being paid to it for future SS benefits. Instead it placed the money in the hands of the politicians who (surprise, surprise) used it for pork barrel, extra billion dollar B1 bombers the Pentagon didn’t want, “bridges to nowhere”, various social programs, etc. to get themselves reelected, pay off their buddies, etc. The >99% of elderly currently collecting SS benefits don’t feel that they got anything for their payments until they retired. This is not a “welfare” system. Since the government spent all the money, they now only have the income from current SS taxes to pay out the benefits.
An analogy would be a company that has a compulsory retirement plan whereby they remove a %age of each employees salary every paycheck to put in the plan. But the CFO spies the cash and decides to spend it for various company expenses until the amount of money needed to pay the company’s retirees is only covered by incoming payments from current employees. So who is responsible? Is it OK to just cut the retirees off from further payments because it is a “welfare” system.
It gives you a perspective on how much sovereign debt there really is out there.
Hey Ed. SS is not an entitlement; it is a retirement program. I have been paying into it since 1961 and now, even though I am retired and collecting SS I am still paying. The fact that you spent all of MY money does not mean you do not owe me my paltry pitence due. Rather or not I’m rich has nothing to do with it. Unlike the prez I earned every dollar I have and do not think you or he are entitled to my money.
You sound like the prez too; is it a travisty if I live to be 80? Socialism does not work unless you happen to be in charge, but SS is the law of the land and now you must live by your own (FDR) rules. Too bad your hero JFK put all the SS funds in the general fund.
Sounds like a good breakfast to me!
Seems to be a lot of baggage tied to the market that is not totally obvious. I have been beat up on a few techs with good reports in the last two quarters. No conviction either way.
Maybe time to go on a fishing trip.
I see Cisco is off another 1.5% this morning. How much of their business comes from Europe? Could the stagnation in the EU be responsible for this decline. Does Cisco need to adjust its projected revenue figures to reflect a lack of growth comming from out of there?
Saurin,
If the U.S. wants to set up some kind of welfare program for the old and infirm, that’s a different discussion. But SS doesn’t JUST apply to the old and infirm. You can be in perfect health and wealthy at 80 and still collecting SS checks. Why?
The added fact that the government is taking money from young and poor workers to hand out checks to old and wealthy retirees is nothing short of a travesty. But that is the way the SS program works.
Keep in mind that the government just writes itself an IOU for the amount you put into SS. Then they turn around and pay off all current benefits, and spend whatever is left over. There is no SS lockbox where all the money is kept. There never has been.
carter318,
Wait until November. Considering we are starting to see incumbants getting defeated in their own party’s primaries (in both parties no less), I suspect we are going to see a lot of turnover after this coming election.
EdMcGon, I couldnt agree with you more about Social Security being a Ponzi Scheme. If a Wall Street firm in charge of a large pension plan missused the funds to cover deficits in other divisions they would get closed down and its directors sent to jail. The problem is that there is no accountability in Washington. Was not some of the blame for the current crisis a failure by the house banking commitee to regulate the industry washington loves to point fingers at? How come theese guys still have jobs? Should they not have been thrown out along with the Wall Street CEO’s who messed up?
Ed, I would not agree with you about SS. It is a welfare program after the individual has paid for it for several years through employment. I don’t have a green card yet and I have been paying for SS and Medicare for over 11 years. I know one should not rely on SS at all, but I have seen lot of old people who have worked their ass off their entire lives and finally they get shafted by the politicians. I don’t love SS but once an individual becomes old and in-firm society should atleast be human to take care of him/her. After all he worked to earn it. Teach me, if i missed something here. Btw i would noe now how long it would take for us to get the green card. People here at work have a running joke of why didn’t you just cross the border. oh well……..
SPDTANIA,
I have to disagree with that analyst. Frankly, that is a very good practice for Cisco to have, otherwise their stock would continue dropping as they issued more and more employee shares.
In addition, the fact Cisco does pay attention to their employees is a positive sign to me. I don’t think they are ignoring their shareholders at the sake of their employees, or vice versa. Frankly, their moves show me they are trying to take care of both.
georic,
I wouldn’t consider Sarkozy’s idea as socialist (unless he tries to force companies to do it via legislation). It sounds like a good business practice to me, although it wouldn’t necessarily work across all industries.
As for social security, who loves it? If the government dropped social security tomorrow, I wouldn’t shed a tear. A blanket welfare program that covers the wealthiest segment of our population (the elderly) is an inherently bad idea. The fact it is run like ponzi scheme makes it even worse.
I find the point raised by SPDTANIA interesting, inasmuch a few of you tend to consider the EU as socialist. Sarkozy raised havoc when he suggested that profits should be shared 1/3 to shareholders, 1/3 to employees, 1/3 retained by the co for its development: it was considered as too socialistic.
On the other hand, we all love social security (management should be greatly improved though), whether rich or poor and it was hard for us to understand why you should oppose it.
Cisco reportedly has a treasure chest of about 39 billion on hand to spend on whatever they wish. Could have bailed out Greece if they wanted to.
Here is the reason why CSCO is hated by lot of people, and I for one would not own it (though have traded in and out of it). Copied and pasted here:
“…….Taking a totally different approach, Davenport & Co. analyst F. Drake Johnstone downgraded the shares to Neutral from Buy, “since we are concerned that the company spent 89% of its free cash flow over the past nine months to repurchase shares to offset dilution from employee stock options.”
Johnstone notes that Cisco had $6.24 billion in free cash flow in the first 9 months of the fiscal year, and spent $5.55 billion to repurchase 226 million shares, but share count nonetheless increased over that span to 5.869 billion to 5.823 billion. His assertion: “Cisco is being run for the benefit of its employees and not its public shareholders……………”
Hi Jim,
A pattern seems to have emerged recently in that growth company shares are being sold off if earnings or guidance disappoints Wall Street. Is this a signal of an impending correction, or perhaps a shift in style from growth to value?
Jim,
Leave it to Ed to post an answer. I hope you saw it and are rollin………
marr.bo
EU dissolve may not happen any time soon because politicians do not want to prove they were wrong, though some investor predict that the “laggards” have to drop out. I think EU make sense for the original 10 countries or so whose economies were about same level. It also depends on how pissed the German voters are (I herd they are very). If Germany leaves, EU is useless.
Hats off Coach,
You are a POLYMATH.
As if the the STELLAR quality of the advice was
not enough, we get a tutorial on vernacular
folklore too.
Correct me promptly if I am wrong but I read
somewhere that you are a PhD in English
Literature.
Is it true.
Thanks and more power to our group
Have a grand weekend you all.
Bye
What happens to EUO if the Europen Union (and the Euro) dissolves?
The local tavern where I grew up always had hard boiled and raw eggs available. Spittoons too.
My father drank several raw eggs a week (for energy or some such) but without the beer or any alcohol so he never had a hangover. Drinking raw eggs never made sense to me but it’s sure faster than cooking them.
As I recall, back in the old days many working men drank beer for lunch and after work. A raw egg in your beer supposedly helped you recharge from the rigorous work of the day.
an egg in a beer… sounds like an old-fashioned protein shake!
actually I Googled it and they say it is to help prevent hangovers.
I had an American friend from Texas who loved to drink his beer with a fresh egg in it. As to why you like/love something, another American friend made it clear to me, it is because you do, no explanation.
Jim,
This link actually has a logical answer to the “egg in the beer” question:
http://forums.egullet.org/index.php?/topic/97176-raw-eggs-in-beer/
Basically, alcoholics used to start their mornings with one, probably because it was allegedly a cure for a hangover.
On a few other links I looked at, it apparently became a colloquialism, which your grandmother used appropriately.
Jim, sounds like you have a question for NPR’s saturday show A Way With WOrds. If anyone can tell you, they can.
I’m curious to know where the saying comes from. Leave it to Grammas to cut right to the thick of things.
You go, Jim!
For those who cheer all the excellent new “entries” of EU or those who don’t mind to pay for EU’s bailout, here is the latest for you.
Former Fed chair Paul Volcker said today that EU has to DISINTEGRET! Sound like dissolve to me!
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahe4DfQK7ozQ&pos=4