The computer network industry had undergone an economic slowdown of 4% in 2002/2003, after two years of sustained growth with two figures. Moreover, many computer network suppliers outsource their production to reduce their cost. As a consequence there were mass redundancies in Alcatel, Cisco and particularly in Lucent Technologies which divided its workforce by two in three years (50000 redundancies).
[...] Nowadays, as the market is stagnating, Cisco is increasing its gross margin by decreasing its COGS. We can also say that Cisco has a good position in terms of gross margin when compared to its competitors which, as Nortel Networks, can reach a ratio of COGS in the operating revenue of 72%. Evolution of the Operating income The company reduced its Operating Expenses for 2003 which, combined with the gross margin increase, allows a 67% growth of the operating income. [...]
[...] That means that the financial situation is relatively safe for the short term: Cisco has enough liquid assets to cover its short term liabilities. We think that those two ratios are above as we said earlier, because of a good management of the customers and suppliers delays. Since 2001, the suppliers delay has been shorter than the customers delay. That's why Cisco recorded a decrease of 43% between fiscal year 2002 and 2003 of its working capital. The 2 ratios are close because of a quite low level of inventories (near 900 million of total current liabilities). [...]
[...] But, considering the fact that the company has no long term debt, it shows that Cisco systems is in a quite comfortable situation in term of ready money for the moment, and that the company has the means of its expansion if the market wants to grow again. This comfortable cash position is the same for Nortel Networks, since the cash item represented 24% of total assets in 2002. But unlike Cisco Systems, Nortel Networks has already a long term debt of 3.72 which represents 22% of total assets (10K 2002). [...]
[...] Part Financial Analysis Stock Market Figures Number of shares: 7,018,744,853 Price of share: $ 21 Market capitalisation: 145 billion $ Price earning ratio: 37 more or less in the average sector Index Membership: S&P 500, NASDAQ 100, AMEX Internet The stock story of Cisco is a real example of American success story, in 20 years the small company became one of the most important companies on the NASDAQ, a capitalisation market of 145 billion dollars (for information Microsoft 300, Nokia 83, Motorola 32, Lucent tech. [...]
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