Cisco Systems, Inc. (NASDAQ:CSCO) Q1 2020 Earnings Conference Call - Final Transcript

Nov 13, 2019 • 04:30 pm ET

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Cisco Systems, Inc. (NASDAQ:CSCO) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Executive
Chuck Robbins

like there is not a broad based loud noise out there. It feels like there is a bit of a pause. We saw things like conversion rates on our pipeline were lower than normal, which says that things didn't close the way we would have historically seen it. We didn't see any incremental loss ratios. It was really just stuff slipping. We saw some large deals get done but got done smaller. Kelly and I were involved in a couple personally that we saw that when we began talking to the customers about the transactions, about the time they got done, they were -- they were smaller than when we had begun. So that happened. And then we just saw deals that slipped. So we saw a little bit of all that.

But it's not -- I'd say, we also had our teams telling us that the approval process in several customers across a different number of industries were changing, which is usually indicative of, hey, let's add another signature requirement because we want to just put another set of eyes on every expenditure right now. So those are the things we've seen. And unfortunately, I've done this long enough that I've seen it before, so you recognize it when you see it, and that's really effectively what we saw during the quarter. And China, Kelly, was -- exact number.

Executive
Kelly A. Kramer

China continues its decline. It was down 31% versus last quarter where it was down 26%. So the momentum is continuing to just accelerate the decline in China.

Analyst
Samik Chatterjee

Okay, thank you.

Executive
Kelly A. Kramer

Yeah.

Executive
Marilyn Mora

Thank you. Next question, please.

Operator
Operator

Thank you. Paul Silverstein from Cowen. You may go ahead.

Analyst
Paul Silverstein

Thanks. Appreciate it. Kelly, if you could tell us pricing, I know we're going to see it in the Q, but if you could tell us the rate of price erosion, if there was any change. And then if I did the math correctly on opex, it looks like your guidance would suggest around $3.8 billion for the January quarter. That would be down $400 million sequentially and $150 million year-over-year. Do I have that right? Is that the way you're thinking about it? And related to that, how should we think about opex going forward throughout the year? How do you plan and manage expenses given the less-than-expected revenue outlook?

Executive
Kelly A. Kramer

Yeah. So let me take those. So on price, we had a really very, very good quarter on price. It is the lowest in some time in terms of the least amount of price erosion. So from impact on our product gross margin rate, Paul, which is I know the metric you're looking at, it was only 40 basis points.

Now, I will say that's great, and I think we've done a lot of great things on our pricing. For example, we've been selectively -- where we have price elasticity, we'll raise prices, and we've been effective on driving some product transitions and we've been realizing that benefit. I will say, we