Tue, Nov. 24, 8:28 PM
- Favorable trends in cloud traffic are a boon for data-center companies, says SunTrust Robinson Humphrey in a positive launch on the sector.
- Analyst Inder Singh singled out CyrusOne (NASDAQ:CONE), DuPont Fabros (NYSE:DFT) and Equinix (NASDAQ:EQIX) as picks in the space, which should benefit from growing bandwidth-intensive applications, particularly streaming video. Traffic is expected to grow at a compound annual growth rate of 23% through 2019.
- "Given that two-thirds of internet traffic is data center related, the importance of data centers both from a colocation and cloud perspective is significant," says Singh. "Data center traffic is the biggest component of Internet traffic, almost twice as much as the traffic that transverses IP WAN networks."
- Mergers and acquisitions could continue, too, as companies look to become "one-stop shops" for clients and pursue scale.
- The firm launched CONE, DFT, EQIX and Zayo Group (NYSE:ZAYO) at Buy, along with a Buy rating for Cisco Systems (NASDAQ:CSCO), as well as a Neutral rating for Internap (NASDAQ:INAP).
- Price targets: $43 for CONE (22% upside from today's $35.25); $40 for DFT (22% upside from today's $32.90); $345 for Equinix (18% upside form today's $293.21); $32 for Cisco (17% upside from today's $27.27); $7.50 for Internap (7.5% upside from today's $6.98); $34 for Zayo (41% upside from today's $24.02).
Fri, Nov. 20, 8:54 AM
- Cisco (NASDAQ:CSCO) is buying Acano, a London-based provider of group collaboration, unified communications, and audio/video conferencing software, for $700M in cash (presumably offshore) and assumed equity awards, plus retention-based incentives. The deal is expected to close in the April quarter. (blog post)
- Cisco: "Acano's hardware and software includes gateways, and video and audio bridging technology that allows customers to connect video systems from multiple vendors across both cloud and hybrid environments ... Today, less than 10 percent of the conference rooms in the world are connected via video. However, there is a massive market shift underway in collaboration -- customers want the ability to easily connect from anywhere, from dedicated hardware endpoints to sharing video on a mobile phone ... Acano's technology and expertise will enable us to accelerate our development in the key areas of interoperability and scalability."
- Cisco's collaboration revenue (covers videoconferencing hardware, the WebEx and Jabber collaboration software lines, and other products) rose 17% Y/Y in the October quarter to $1.2B, with the help of a videoconferencing refresh. The company faces collaboration software competition both from established players such as Microsoft and Citrix, and from upstarts such as Google (Hangouts), LogMeIn (Join.me), and Slack. Slack recently raised funding at a $2.8B valuation.
- New CEO Chuck Robbins hasn't been shy about making acquisitions. Other recent purchases include OpenDNS (DNS security software/services), Lancope (security analytics software), and MaintenanceNet (service contract management software)
Wed, Nov. 18, 6:38 PM
Mon, Nov. 16, 3:44 AM
- Ericsson (NASDAQ:ERIC) has quashed a recent media report that claimed Cisco (NASDAQ:CSCO) was seeking to buy the Swedish networking giant, stating there haven't been any merger talks.
- "We note that there are rumors in the market regarding an acquisition of Ericsson by Cisco possibly spurred by the recent announcement of a partnership between our two companies," Ericsson CEO Hans Vestberg said.
- Cisco shot down the report shortly after it surfaced on Friday.
Fri, Nov. 13, 3:49 PM
- A Swedish media report stating Cisco (CSCO -6%) is looking to buy mobile infrastructure/services giant Ericsson (ERIC - unchanged) led the latter's shares to briefly rise as much as 9.6% before giving back their gains. Markets are evidently skeptical.
- Worth noting: Cisco CEO Chuck Robbins just stated his company isn't looking to make large acquisitions. and is instead focusing on "small strategic" deals. Ericsson is currently worth $31B.
- Cisco and Ericsson are four days removed from announcing a comprehensive technology/reseller partnership. Ericsson will offer Cisco's switches/routers to mobile carriers in tandem with its own mobile infrastructure hardware and network services, Cisco will pair Ericsson's OSS/BSS network management software with its offerings, and the companies will form a "joint initiative focused on SDN/NFV and network management and control."
- Update: Cisco tells CNBC reports it's looking to buy Ericsson are "not true."
Fri, Nov. 13, 12:23 PM
- Cisco (NASDAQ:CSCO) has fallen towards $26 after beating FQ1 estimates, offering soft FQ2 guidance, and reporting 3% Y/Y product order growth (less than expected) due to a 3% drop in enterprise orders. Several firms have cut their targets, but no downgrades have arrived.
- "While weaker macro trends certainly played a role, we believe there is more to the story," writes Guggenheim's Ryan Hutchinson (Neutral). "Our checks suggest that, despite management’s statements to the contrary, the weak enterprise outlook is partially a result of uncertainty around future network architectures as more workloads migrate to the cloud. With this added risk to Cisco’s top-line outlook, we see little reason for shares to move higher"
- Macquarie's Rajesh Ghai (Underperform) thinks Cisco's 8% Y/Y routing revenue decline reflects "secular pressures" seen as carriers consider adopting network functions virtualization (NFV - allows networking functions to be delivered via software installed on commodity hardware) at the network edge.
- Meanwhile, Credit Suisse's Kulbinder Garcha (Underperform) believes Cisco is "increasingly making a trade off in optimizing margins versus pursuing growth" as rival software-defined networking (SDN) platforms encroach. "We acknowledge that the adoption of SDN will take time, but will shrink gross profit dollars for the networking stack."
- Those more bullish often highlight Cisco's strong software/subscription growth. Raymond James' Simon Leopold (Outperform): "The 36% y/y growth in software and subscription deferred revenue, and 10% y/y growth in total deferred revenue highlights Cisco’s shift towards a more software-centric business." Software growth drove a 31% increase in security deferred revenue.
- BMO's Tim Long (Outperform): "There were many positives in the quarter, including very strong margins, uptake of new products, impressive growth in subscription-based product deferred, switching, data center, and a rebound in emerging markets." Drexel Hamilton's Brian White (Buy) notes Cisco plans to announce a co-developed project with a major web-scale data center owner next week.
- On the earnings call (transcript), Cisco stated emerging markets orders grew a healthy 11% Y/Y, with China (weak in recent years) and India up over 40%. Service provider and commercial (SMB) orders respectively grew 6% and 7%, while public sector orders were flat. Asia-Pac markets outside of China and India were weak.
- Separately, CEO Chuck Robbins says Cisco won't be responding to the Dell/EMC deal with a giant acquisition of its own, and would only look for "small strategic" deals. "My personal opinion is that the market is moving too fast for these big mergers to be effective." There has been speculation Cisco would respond to Dell/EMC by acquiring EMC rival NetApp (NTAP -1.7%), which is currently worth $9.2B.
- Prior Cisco coverage
Thu, Nov. 12, 4:30 PM
- "Our guidance reflects lower than expected order growth in Q1, driven largely by the uncertainty of the macro environment and currency impacts," says Cisco (NASDAQ:CSCO) CEO Chuck Robbins in the FQ1 report.
- Financials: Lifting FQ1 EPS: Gross margin was 63.2%, up 120 bps Q/Q and -10 bps Y/Y, and above guidance of 61%-62%. The Q/Q growth is attributed to productivity improvements, partly offset by pricing and product mix. FQ2 GM guidance is at 62%-63%. Also boosting EPS: Job cuts led non-GAAP operating expenses to drop 1% Y/Y to $4.1B, and $1.2B was spent to buy back 45M shares at an average price of $26.83. The tax rate was 23%.
- Product line performance: Switching revenue +5% Y/Y to $4B. Routing (hurt by soft carrier demand) -8% to $1.8B. Collaboration +17% to $1.2B. Data center (UCS servers, gaining share) +24% to $859M. Service Provider Video -2% to $850M. Wireless (Wi-Fi) +7% to $645M. Security (a recent priority) +7% to $485M. Product sales overall rose 4% to $9.8B, and services 1% to $2.8B.
- Geographic performance: Americas revenue +4% Y/Y to $7.8B. EMEA +3% to $3.1B. Asia-Pac +3% to $1.8B.
- Growing subscription/software sales led the deferred revenue balance to rise 10% Y/Y to $15.2B. Cisco ended FQ1 with $59.1B in cash (just $5B in the U.S.), and $24.6B in debt.
- CSCO -3.5% after hours to $26.85.
- FQ1 results/FQ2 guidance, PR
- Update (5:01PM ET): On the earnings call, Robbins states total product orders rose 3% Y/Y, after growing 4% in FQ4. Enterprise product orders (hurt by a shift in IT spend towards cloud services?) were weak, dropping 3% Y/Y. Americas orders +1%, EMEA +3%, Asia-Pac +9%. Cisco is now down 5.5%.
Thu, Nov. 12, 4:09 PM
Wed, Nov. 11, 5:35 PM
Mon, Nov. 9, 4:09 AM
- Dubbing it the "Networks of the Future," Ericsson (NASDAQ:ERIC) and Cisco (NASDAQ:CSCO) have agreed to create a partnership expected to be a key driver of growth and value for the next decade and generate revenues of $1B for each company by 2018.
- According to a press release, the multi-faceted relationship will offer customers the best of both companies: routing, data center, networking, cloud, mobility, management and control, and global services capabilities.
Tue, Oct. 27, 10:51 AM
- Cisco (CSCO -0.1%) is buying Lancope, a security analytics software firm that provides tools for analyzing network traffic, identifying and tracking apps, viewing global threat intelligence, and identifying the source of a security event. The company is paying $452.5M in cash and assumed equity awards, and will also provide retention incentives.
- Cisco: "With Lancope, Cisco's portfolio of security solutions adds an additional capability of network behavior analytics that extends protection further into the network." Lancope's software complements Cisco's existing security appliance and software offerings, and fits with the company's strategy of embedding security features throughout its networking product line.
- Also being acquired: ParStream, a German provider of a distributed analytics database for IoT-related data. Terms are undisclosed.
- Cisco: "Using innovative compression and indexing capabilities, ParStream’s technology helps customers access data faster and at scale, rapidly analyzing and filtering billions of records and getting information to the business in near real-time. This acquisition complements Cisco’s current data and analytics portfolio, improving our ability to provide analytics at the edge of the network, where data is increasingly being generated and in huge volume."
- The ParStream acquisition follows the June launch of Cisco's IoT System, which aims to deliver an end-to-end networking solution (featuring hardware, software, and services) for Web-connected embedded devices. CRN observes ParStream could compete with HP's (NYSE:HPQ) Vertica analytics database.
- Recent Cisco acquisitions: OpenDNS (DNS security software/services, $635M), MaintenanceNet (cloud contract-management software, $139M), Neohapsis (security advisory services), Embrane (virtual appliance management software).
Tue, Oct. 20, 3:43 PM
- Reseller checks pointed to growing enthusiasm for Cisco's (CSCO +0.9%) cybersecurity offerings following a long period of underperforming peers, William Blair's Jason Ader (Outperform rating) reports. He adds several resellers observed higher attach rates for advanced features such as intrusion prevention (IPS - obtained via the SourceFire acquisition) and app visibility/monitoring, and that an integrated security platform combining next-gen firewalls, identity access, and Web security is rumored to be due in March.
- New CEO Chuck Robbins has made a priority out of growing Cisco's security revenue, which rose a modest 4% Y/Y in the July quarter (many smaller peers are seeing 20%+ growth). In recent months, the company spent $635M to buy cybersecurity software/services firm OpenDNS, rolled out next-gen firewalls and related threat-detection/response services, and announced a security strategy that involves embedding security features throughout its hardware line.
- Also reported by Blair: Cisco's Nexus 9K data center switches are seeing strong adoption, as is the ACI SDN/network virtualization software platform (supported by the Nexus 9K line). Blair is confident ACI will help protect Cisco from VMware's rival NSX platform (also growing rapidly, and backed by many Cisco rivals).
- Meanwhile, Cisco's enterprise campus switch demand is benefiting from 10G/40G switch adoption, and its Meraki Wi-Fi platform continues seeing strong win rates. And channel checks point to continued strength for Cisco's UCS server line in spite of a weak enterprise server market. UCS segment revenue was up 14% Y/Y last quarter.
Thu, Oct. 15, 3:34 PM
- Charter Communications (CHTR +1.7%) is putting a new "remote DVR" to the test, according to an FCC filing by partner Cisco (CSCO +1%).
- The companies had announced a major partnership in January tied to Charter's next-gen Worldbox product. But facts are only now beginning to emerge about what that might mean for cloud video.
- "Cisco currently is working with Charter on a remote DVR trial for IP video to the home, and on backbone and regional access network upgrades to enhance Charter's ability to support streamed video traffic through its network to the customer premises," Cisco says in a filing tied to the FCC's review of Charter's Time Warner Cable merger.
- Charter currently supports third-party DVRs that store recordings "on the box" and some remote scheduling capabilities, but not cloud storage. A cloud DVR solution could make for inexpensive boxes, as recordings are stored remotely, and far wider access to programs from different devices and locations.
- FCC filing
Wed, Oct. 14, 5:08 PM
- Deutsche's Karl Keirstead (Hold) cut his FireEye (NASDAQ:FEYE) target by $9 to $35 today, while reporting reseller checks point to growing competition from Palo Alto Networks (NYSE:PANW) and Cisco (NASDAQ:CSCO), each of which offer cheaper rival malware-protection offerings (WildFire and Threat Grid, respectively).
- Keirstead is more upbeat about what he saw at FireEye's annual Cyber Defense Summit conference, in particular noting demand was strong for FireEye's Mandiant endpoint protection/incident-response offerings (often used to probe major cyberattacks), and that some firms were thinking of switching from Cisco to Mandiant.
- However, he added many attendees that have deployed FireEye's core NX Series malware-detection hardware/software have passed on buying additional services due to their high cost or a shortage of trained personnel, and that some are deploying Palo Alto's cloud-based WildFire service in tandem with FireEye's offerings. Palo Alto reported on its July quarter call (transcript) WildFire customers had grown 140% Y/Y to over 7K.
- Stifel's Gur Talpaz (Buy) returned from the Cyber Defense Summit more bullish on FireEye, noting there were over 2K attendees (up from ~1,500 a year ago) and arguing FireEye's core solutions remain "functionally superior" for detecting and preventing threats other firms can't find. He's also pleased with FireEye's recent launch of a next-gen MVX malware-execution engine (runs on NX Series gear) and an updated version of its HX series endpoint protection software.
- With investors in high-growth/money-losing tech companies in a risk-averse mood lately, FireEye closed below $29 today for the first time since last December. Q3 results arrive on Nov. 4.
Mon, Oct. 12, 6:32 PM
- Thanks to VMware's (NYSE:VMW) 8.1% drop in regular trading, the official value of Dell's buyout offer for EMC ($24.05/share in cash + 0.11 shares of a VMware tracking stock) fell from $33.15/share to $32.00/share. However, that's still 13% above EMC's $28.35 closing price.
- Part of the discount likely stems from expectations VMware tracking stock will trade at a discount to its regular shares, given the tracking stock will have no voting rights or access to dividends (should VMware begin paying one). Nonetheless, some M&A arb traders see a compelling opportunity, assuming the tracking stock trades at a moderate discount.
- There's speculation another tech giant could bid for EMC during its go-shop period. But there haven't been any formal reports of buyout interest, and EMC's current price suggests markets are skeptical of a rival bid arriving. HP (NYSE:HPQ) used today's news to trash-talk EMC/Dell - "Two of our largest competitors are attempting a highly distracting, multi-year merger, just as we are launching two new, focused companies." - while Dell server/networking rival Cisco (NASDAQ:CSCO) affirmed its partnership with EMC.
- Meanwhile, several analysts defended VMware as shares tumbled thanks to the EMC/Dell news and VMware's Q3 pre-announcement - revenue and EPS are expected to top estimates, but billings growth of 3% Y/Y fell short of expectations. Cowen's Gregg Moskowitz: "While we believe this deal certainly could have been better structured (i.e. there is no collar on VMW's stock), and the billings were disappointing, the selloff nonetheless looks clearly overdone, as we expect no meaningful impact to VMW's strategy or operations."
- MKM's Kevin Buttigieg: "At the current intraday price of $71, VMW is 13x CY16 consensus EPS excluding net cash of $13/share, a level we think presents tremendous value, though likely requires patience given uncertainty around the Dell deal." On this morning's conference call, departing EMC CEO Joe Tucci suggested Dell is looking to up its VMware stake over time.
Mon, Oct. 5, 2:52 PM
- Cisco (NASDAQ:CSCO) is among the biggest large-cap tech gainers as the Nasdaq rises 1.5%, and the S&P 1.8%. Volume is moderate - 19.1M shares vs. a 3-month daily average of 28M.
- Possibly helping: CEO Chuck Robbins and several other execs have been holding court today at Cisco's 2015 Global Editors Conference (webcast). Echoing a few other tech giants, Robbins and others emphasized the importance of analytics/machine learning investments, and of IT solutions that reduce customer opex.
- Cisco is at its highest levels since August. Shares go for 12x an FY16 (ends July '16) EPS consensus of $2.30.
Cisco Systems Inc is engaged in designing, manufacturing and selling of Internet Protocol (IP) based networking products and services related to the communications and information technology (IT) industry.
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