Watch out, falling margins


Yahoo!: Cisco says its comfortable with Wall Street sales forecasts for 2005, but fessed up to facing more pricing pressure and declining gross margins. Yup… China factor at play here again. Powell told analysts that the company is “starting to see more pricing pressure and more opportunities for higher discounts.” I have said that previously that margin is going to be an issue. I think next year if you backed out Linksys-based revenue growth, you might find a giant wheezing a little. “We believe lower pricing is now eroding gross margins as well,” wrote J.P. Morgan analyst Ehud Gelblum in a research note. “In a strong market, no problem, but with current slow (revenue), earnings per share growth gets tough.”

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