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Why did Cisco deflate its FY11 security product sales by -$382 million?

Does this mean in the past Cisco inflated product sales figures +24% for its security business?

Mon, 2/6/12 - 8:51pm    View comments

Cisco Investor RelationsHopefully I'll be out of the hospital on Wednesday, February 8th in time for Cisco's Q2'FY12 earnings conference call webcast.

Why?

Well, I'm very curious to hear if Wall Street calls-out Cisco CEO John Chambers and/or Cisco CFO Frank Calderoni with regard to the absolutely huge FY11 deflated and/or inflated Cisco security product sales figures.

In less than 2-years Cisco changed its product sales reporting categories twice:

  1. On November 9, 2011
  2. And previously on November 10, 2010
Most noteworthy, there were only 2 product sales categories that Cisco did not make additions and/or substractions to: Wireless and Security.

All of the other Cisco product sales categories had either additions and subtractions made or both.

Last week I received the following email message:
 

Email 10th November 2011 link 10th August 2011 link
 

Marc MusgroveI mean, the above email caught me totally off-guard as it NEVER occurred to me that Cisco would play fast and loose with its product sales reporting, especially given the litigious society we live in today.

So I emailed and then spoke by phone with Cisco's top notch and in my opinion most responsive media contact, Marc Musgrove - Director of Cisco's Global Communications. Marc said he could not respond to my inquiry because of U.S. Securities and Exchange Commission "quiet period laws."

The below -1.10% (i.e. -$16 million) descrepancy between the old and new FY11 Cisco wireless product sales reporting could possibly be attributed to a "rounding error."

Cisco's wireless quarterly product sales in millions
(under both Cisco's old and new sales reporting categories)

Wireless Q1'FY10 Q2'FY10 Q3'FY10 Q4'FY10 Q1'FY11 Q2'FY11 Q3'FY11 Q4'FY11 Q1'FY12
Old 310 254 271 307 338 340 358 407  
New         334 335 353 405 362
Discrepancies -4 -5 -5 -2  
New divided by Old Discrepancy Percentage -1.18% -1.47% -1.39% -0.49%  
Total Cisco Wireless FY11 Product Sales Discrepancy:   -$16 million
Total Cisco Wireless FY11 Product Sales Discrepancy Percentage:   -1.10%

 

However, Cisco's -24.14% (i.e. -$382 million) descrepancy between the old and new security product sales reporting most certainly can't be attributed to a "rounding error."

Cisco's security quarterly product sales in millions
(under both Cisco's old and new sales reporting categories)

Security Q1'FY10 Q2'FY10 Q3'FY10 Q4'FY10 Q1'FY11 Q2'FY11 Q3'FY11 Q4'FY11 Q1'FY12
Old 403 394 405 526 395 359 413 415  
New         290 270 316 324 320
Discrepancies -105 -89 -97 -91  
New divided by Old Discrepancy Percentage -26.58% -24.79% -23.48% -21.92%  
Total Cisco Security FY11 Product Sales Discrepancy:   -$382 million
Total Cisco Security FY11 Product Sales Discrepancy Percentage:   -24.14%

 

In my personal opinion, this raises a giant "red flag" that Wall Street needs to clarify during Cisco's February 8th earnings conference call.
 

Related stories:

Unconfirmed rumor Cisco offered $2.5 billion to buy Palo Alto Networks and was turned down

Cisco's Q2'FY12 switching, routing, collaboration revenues and product gross margin sequentially declined

Cisco's historical financial statements confirm -$809 million discrepancy in security sales
 


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