Cisco's guidance, orders spark AH selloff in enterprise/telecom tech names

Cisco's (CSCO) dispiriting Jan. quarter guidance and Oct. quarter order data has produced an AH selloff in enterprise IT and telecom equipment names, as well as a couple of the companies supplying them. NetApp's below-consensus guidance might not be helping either.

HPQ -2.1% AH. IBM -1.1%. ALU -2%. FFIV -1.9%. CIEN -0.9%. CAVM -3%. BRCM -1.3%.

Cisco's slumping FQ1 service provider (-13% Y/Y) and emerging markets (-12%) orders are bound to fuel concerns about carrier capex and macro trends. At the same time, it's worth noting Juniper and Alcatel-Lucent have been seeing better router sales to carriers (though not to Asia), and that Huawei has been doing better in emerging markets.

The rest of Cisco's order data for major regions and customer groups was relatively better, but not exactly encouraging. Americas orders -2%, EMEA -4%, Asia-Pac (hurt by emerging markets weakness) -9%. Enterprise orders +2%, commercial (SMBs) +1%, public sector -1%.

Switch sales (31% of revenue) rose 3% Y/Y, while routers (17% of revenue) fell 1%. Collaboration rose 1%, and service provider video fell 14% due to set-top weakness. Cisco's ASR 9000 edge router line, which EZchip (EZCH) supplies network processors for, grew 20% in FQ1 vs. 43% in FQ4.

Data center (UCS servers) had another strong quarter, growing 44%, but still only accounts for 5% of revenue. Wireless (dominated by Wi-Fi gear) grew only 8% after growing 32% in FQ4 (could be a negative for ARUN and RKUS).

John Chambers was asked on the CC (transcript) if the NSA spying uproar was affecting Cisco. He admitted it's a problem in China, but denied it was a major issue elsewhere.

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Comments (5)
  • tommyleenyc
    , contributor
    Comments (29) | Send Message
    Orders down 20-30% in China, Russia, Brazil -- all three countries implicated in the Snowden leaks and we are suppose to believe that only had minimal impact? Lets ignore the fact that IBM's hardware biz fell 50% q/q last quarter as well
    13 Nov 2013, 10:22 PM Reply Like
  • King Rat
    , contributor
    Comments (1721) | Send Message
    Good call, tommyleenyc, good call. We'll see in 3 months if this was a blip or the start of a trend.
    I've dealt with China for a while and found that Chinese who can afford it generally pay a premium for anything made in America or by an American brand. The downturn there is shocking.
    What is also shocking is that even after the yen returned to the upper 90s level from upper 70s, Chinese speculators, upset about island politics, purchased property in the US in great numbers. However since the Snowden blowup, many Chinese speculators have decided to purchase property in Japan instead of the US.
    Why is that a big deal? Because it shows that the Snowden issue upset Chinese more than the island issue, which was a case of national pride and pain lingering from WWII.


    Hey US politicians, at least Japan can thank you for making their WWII atrocities such as chemical terrorism and the Rape of Nanking look like Pee Wee Herman doing his thing in a movie theater by comparison.
    14 Nov 2013, 12:00 AM Reply Like
  • Andreas Hopf
    , contributor
    Comments (19222) | Send Message
    CSCO spyware is no longer in fashion, so it seems.
    14 Nov 2013, 07:00 AM Reply Like
  • s.khan
    , contributor
    Comments (80) | Send Message
    The sales decline in emerging markets particularly China
    is not surprising. IBM, in conference call of Q3 earnings,
    mentioned the same. Wall street analysts, ill informed of
    global macro factors, put a negative spin on the performance
    and started sell off. Their mantra that the company should
    show growth irrespective of headwinds in the market is
    astoundingly ridiculous. when would they learn? These
    analysts need to learn lot more about market conditions
    around the world to make sense of their analysis rather
    than calculating percentage change in sales and earnings.
    14 Nov 2013, 11:40 AM Reply Like
  • stoj
    , contributor
    Comments (774) | Send Message
    China's got their own factories at Huawei for hardware switches, when it comes to software IBM + Google + Amzn etc have unparalleled quality of service, however, they are not available to the same extent as domestic players in China ( Russia + Brazil are in a general downturn because of low demand for commodities, because the world GDP sucks, and USA can not save everyone )
    14 Nov 2013, 06:34 PM Reply Like
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