Given the uncertainty on both service provider and corporate IT spending, visibility is the poorest in several years. We expect Cisco to be cautious on its near-term outlook despite indications that business in some segments has improved.
More Quotes from Michael Ching:
We continue to believe that aggregate service provider spending in the U. S. will actually grow about 10 percent in 2001, and that our companies will report an average revenue increase of 25 percent next year. Despite this, the average price-earnings multiple of our group is now approaching levels last seen in 1997-98.Michael Ching
Our view remains unchanged from our recent update on capital expenditures. We believe that in 2001 cap-ex will be up approximately 10 percent. We continue to forecast 17-18 percent industry growth in 2001. We expect the stocks to remain under pressure over the next few weeks as investors digest capital spending plans from carriers.
Michael Ching
Specifically, the company suffers from a bloated inventory of older model phones, which is slowing the transition to newer, higher-margin products.
Michael Ching
Lucent has run up recently on media discussion of being a take-over target. We believe that in the current environment, this is a possibility.
Michael Ching
Our concern on Qualcomm relates to the outlook for the handset and CDMA business. As we have indicated previously, we remain concerned that the company may take down forecasts for future earnings because we think the company's CDMA forecasts are too aggressive.
Michael Ching
Chipset sales declined 26 percent to 269 million, and operating margins dropped to 24 percent from 39 percent. Qualcomm shipped only 11 million chipsets in the quarter, down from 15 million in the preceding quarter and 13.5 million a year ago. This disappointing performance partially reflected continued weak demand in Korea.
Michael Ching
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