Oct. 12, 2015, 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.
Oct. 5, 2015, 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.
Sep. 24, 2015, 3:54 AM
- More partnerships between Chinese and U.S. technology firms are being announced during Chinese President Xi Jinping's visit to the United States this week.
- Cisco (NASDAQ:CSCO) is forming a joint-venture with server maker Inspur to sell networking and cloud computing products in China, where the company faces political pressure and declining sales.
- Meanwhile, Microsoft (NASDAQ:MSFT) is partnering with Baidu (NASDAQ:BIDU) and Tsinghua Unigroup to sell cloud services to Chinese state-owned enterprises. Microsoft also struck a deal with China Electronics Technology Group to explore ways to deploy a "localized" version of Windows 10.
Sep. 22, 2015, 9:31 PM
- Cisco (NASDAQ:CSCO) is expected to announce a partnership in China with Inspur Group as it makes a bold move to adjust to a difficult local market.
- The company's revenue in China estimated to have fallen off 30% from a peak of $2.04B in fiscal year 2012.
- Cisco's interest in the upstart server maker shows its willingness to try a different tactic in China. It's also a bit of a departure for a tech concern that has worked closely with the Chinese government in the past.
- Sources expect the announcement by Cisco to be made tomorrow while Chinese President Xi Jinping is being entertained in Seattle.
Sep. 18, 2015, 7:05 PM
- "In recent years, Cisco (NASDAQ:CSCO) has worked to shift its business toward a more predictable model by targeting growth in software and subscription-based recurring revenue streams, observes Oppenheimer's Ittai Kidron, reiterating an Outperform and $32 target. He thinks the company's recurring product revenue has more than doubled since FY08, and could post a 19.3% CAGR (more than doubling again) through FY20.
- Kidron, who has been bullish on Cisco for many years, adds more revenue related to recurring streams is locked in during initial quarters, and estimates Cisco's leasing activity has risen 2.6x since FY08, increasing customer stickiness. "It would take time for investors to credit Cisco, yet we feel it's on the right long-term path for multiple expansion."
- In addition to hardware leasing, Cisco has tried to grow recurring revenue by increasing its services exposure (including for cloud services), and by selling subscription-based software in fields such as security, SDN, Web conferencing, and Wi-Fi management. The company has also begun selling software bundles via subscriptions, through its ONE licensing program.
Sep. 15, 2015, 5:01 PM
- Cisco (NASDAQ:CSCO) declares $0.21/share quarterly dividend, in line with previous.
- Forward yield 3.23%
- Payable Oct. 21; for shareholders of record Oct. 5; ex-div Oct. 1.
Sep. 11, 2015, 11:38 AM
- Arista (ANET -8.2%) is down 13% over the last two days following reports the ITC's staff has concluded the company infringes 3 Cisco (NASDAQ:CSCO) patents. An ITC administrative law judge (ALJ) still has to rule on Cisco's claims, after which the full ITC commission will make a decision. An ALJ hearing runs from Sep. 9-17.
- Cisco originally sued Arista last December, alleging its share-gaining data center switch rival infringed 14 patents and lifted copyrighted materials wholesale. Cisco's ITC complaint was amended after a federal judge dismissed the company's indirect infringement complaint against Arista in July.
- William Blair's Jason Ader notes ITC staff recommendations are non-binding, but adds judges often rely on them when making decisions. "As a result, we believe Arista is developing contingency workaround plans both from an R&D and manufacturing perspective in the event that an injunction is eventually awarded ... Nevertheless, with the ITC case in the initial stages, and with several lawsuits and subsequent appeals likely still to come, it is still too early to make a definitive call on the outcome or any potential impact from the litigation."
- Guggenheim's Ryan Hutchinson: "[W]e continue to believe that the legal proceedings are likely to be a multi-year process, with resolution in late 2016 at the earliest ... Arista's fundamentals and business momentum remain strong, and we view the recent weakness as a compelling buying opportunity."
- Yesterday, SA author Markman Advisors offered a downbeat take on Arista's defenses against Cisco, and argued an ITC exclusion order for U.S. sales of infringing products is possible. "Cisco is pulling out all the stops by running two different District Court actions and two separate ITC investigations spanning fourteen (14) patents and scores of copyrights ... ANET's responses to date are simply not sufficient to stop Cisco's patent locomotive."
Aug. 31, 2015, 2:37 PM
- Apple (AAPL -0.3%) is partnering with Cisco (CSCO -0.3%) to improve the performance of iOS devices - in Apple/Cisco's words, create a "fast lane" for iPhones/iPads - communicating via Cisco's networking hardware, which is ubiquitous at many enterprises and institutions.
- The companies are also working on creating "a seamless experience" between iPhones and desk phones in environments featuring Cisco voice/video hardware. Cisco's WebEx Web conferencing platform, Telepresence videoconferencing hardware, and Spark Web collaboration platform will be covered by the tie-up.
- The deal comes 13 months after Apple announced a partnership with IBM, which has since led to Big Blue releasing a number of iOS apps meant for business verticals. Apple has also partnered with various indie developers to bring enterprise-focused iOS apps to market.
- Separately, 9to5 Mac reports the next Apple TV set-top (expected to be shown off at Apple's Sep. 9 event) will sell for $149-$199, support 3rd-party Bluetooth gaming controllers to go with downloadable App Store games, and come with a remote featuring motion sensors and a button that activates Siri.
- The site previously reported Apple plans to continue selling the current $69 Apple TV, and that both the new and old models will support Apple's Web TV service when it launches. BuzzFeed has also shared details about the next-gen model.
- Also: Piper's Gene Munster speculates Apple is exploring its options in the augmented reality market. He highlights Apple's purchases of motion sensor maker PrimeSense and AR software firm/patent owner Metaio, as well as the hiring of the lead audio engineer for Microsoft's HoloLens AR headset.
Aug. 17, 2015, 1:23 PM
- Morgan Stanley's James Faucette has downgraded Cisco (CSCO -0.5%) to Equal Weight four days after shares rallied (amid analyst praise) in response to an FQ4 beat.
- Faucette argues elevated VC investments in networking startups "necessitates that Cisco and other incumbents keep opex investment high," even as its core end-markets show limited growth. He also thinks the Cisco's current product refresh cycle will be relatively weak, given a shift in IT budge priorities to security and software. Cisco appears to be planning new security acquisitions.
- Also: Skepticism is aired about arguments that Cisco will see multiple expansion - "[T]he company has traded consistently at ~13x for much of the last 5 years and we believe would need to show more secular growth to get credit for expansion.” - and Faucette doubts "large needle-moving acquisitions" will be made in the near-term, as new CEO Chuck Robbins and his overhauled management team get acclimated.
- Cisco is off modestly on a day the Nasdaq is up 0.6%.
Aug. 13, 2015, 2:21 PM
- Cisco (NASDAQ:CSCO) is at its highest levels since June after beating FQ4 estimates and providing in-line FQ1 guidance in its first report with Chuck Robbins at the helm. A handful of firms have hiked their targets.
- During the earnings call (transcript), CFO Kelly Kramer stated product orders rose 4% Y/Y in FQ4, an improvement from FQ3's 2% growth. Americas orders rose 7%, while EMEA and Asia-Pac orders (hurt by forex) each fell 1%. Commercial (SMB) orders were a strong point, rising 11%, and service provider orders (aided by easier comps) grew 2%, ending an 8-quarter string of declines. Enterprise was down 1%, and public sector up 4%.
- Also mentioned: 26 of Cisco's 28 largest enterprise customers now use its Nexus 9000 data center switches (they support the ACI/APIC SDN platform), and strong growth was seen for the company's core router lines (edge routing was softer).
- Atlantic Equities' Josep Bori (Overweight rating) likes the pickup in product order growth and calls the service provider improvement "a welcome surprise" given soft U.S. capex. He's less thrilled with the modest growth (+2% and +3% Y/Y, respectively) seen in switch and router sales.
- BMO's Tim Long (Outperform): "The strong results reflect the burgeoning traction of multiple simultaneous product refreshes across the portfolio, a push to software and subscription-based offerings that was highlighted by strong deferred product revenue growth, and strength in the Americas. We are positive on the momentum of the business and the early steps taken by CEO Chuck Robbins and the rest of the new management team. We like the valuation at current levels and believe Cisco’s transition to a more predictable business model and software-based offerings can help lift the multiple as well as improve margins and profitability over the long run."
- Some concerns have been voiced about light enterprise and international orders, and those with neutral/bearish ratings are quick to note Cisco benefited from favorable comps. Needham's Alex Henderson (Hold): "The results were very US-centric ... the comps get much difficult in [FQ2 and FQ3]"
- FQ4 results, guidance/details
Aug. 13, 2015, 11:23 AM
- Brean has upgraded EZchip (NASDAQ:EZCH) to Buy a day after the company post a Q2 beat and issued in-line Q3 guidance. Chardan Capital has hiked its target by $5 to $20. Shares are now up 18% over the last two days.
- Meanwhile, Cisco (CSCO - expected to make up ~35% of EZchip 2015 revenue) reported yesterday afternoon its router sales rose 3% Y/Y in the July quarter. On the earnings call (transcript), CEO Chuck Robbins noted high-end carrier router sales were strong, and that Cisco needs to "probably improve our performance in our edge routing platforms."
- EZchip's processors go into line cards for Cisco's ASR 9000 edge router line, but Cisco plans to use proprietary ASICs in next-gen edge router line cards. During EZchip's earnings call (transcript), CEO Eli Fruchter stated ~25% of EZchip's revenue is tied to the ASR 9000, and 10% to other Cisco products. "[W]e believe prior investor expectations for 35% to 40% of our revenues to be at risk due to the decision by Cisco for next generation line cards in its ASR9K platform, may be overstated."
Aug. 12, 2015, 4:24 PM
- Cisco (NASDAQ:CSCO) has broken with past custom in its first earnings report during the Chuck Robbins era, disclosing guidance (and much else) in its earnings release rather than on its call. The company expects 2%-4% Y/Y FQ1 revenue growth and EPS of $0.55-$0.57, in-line with a consensus for 2.5% growth and EPS of $0.56.
- FQ4 gross margin was 62.1%, down from FQ3's 62.5% but up from the year-ago period's 61.8%, and above guidance of 61%-62%. Product GM was 61%, and services GM 65.9%. FQ1 GM guidance is also at 61%-62%.
- Segment performance: Product revenue +4% Y/Y to $9.9B; services +4% to $2.9B. Switching product revenue +2% to $3.72B. Routing +3% to $1.99B. Collaboration +14% to $1.09B. Data center (UCS servers) +14% to $880M (share gains). Wireless (Wi-Fi-driven) +7% to $715M. Security +4% to $464M (others are growing faster). Service provider video -7% to $994M ahead of the set-top unit's sale. Other product revenue -3% to $59M.
- Regional performance: Americas revenue +7% Y/Y to $7.8B. EMEA roughly flat at $3.1B. Asia-Pac roughly flat at $1.9B. As for peers, forex has been a major international headwind.
- Financials: $1B was spent to buy back 35M shares (boosted EPS). Operating expenses (non-GAAP) rose just 1% Y/Y to $4.2B. GAAP R&D spend totaled $1.55B, sales/marketing $2.55B, and G&A $536M. The deferred revenue balance rose 7% Y/Y to $15.2B, with product deferred revenue growing by double digits. Cisco ended FQ4 with $60.4B in cash ($53.4B offshore), and $25.3B in debt.
- Cisco has risen to $28.70 in after hours trading.
- FQ4 results, PR
Aug. 12, 2015, 4:06 PM
- Cisco (NASDAQ:CSCO): FQ4 EPS of $0.59 beats by $0.03.
- Revenue of $12.8B (+3.6% Y/Y) beats by $150M.
- Shares +0.22%.
Aug. 11, 2015, 5:35 PM
Jul. 27, 2015, 12:04 PM
- A day after officially becoming CEO, Chuck Robbins has named Zorawar Biri Singh, once the head of HP's cloud ops and then a partner at VC firm Khosla Ventures, Cisco's (CSCO -0.1%) CTO of Platforms and Solutions. His role will be to "further [Cisco's] success at anticipating customer and industry transitions, and define the [company's] technology strategy to stay ahead of the market."
- In June, Cisco named M&A chief Hilton Romanski its chief technology and strategy officer, as part of a broader announcement regarding Robbins' leadership team. However, Romanski's bio page only refers to him as chief strategy officer. Robbins states Singh will work with Romanski and Cisco's strategy team "to align our technology strategy with our business strategy and corporate development priorities."
- Also: Kevin Bandy, once an exec at Salesforce.com and Accenture (and after than an industry consultant), has been named Cisco's chief digital officer. His (vague) job description is to "design a comprehensive vision for [Cisco], and our customers, to capture the true value of digitization by leveraging Cisco’s broad portfolio of solutions and services." Bandy will work with recently-appointed operations SVP Rebecca Jacoby.
Jul. 24, 2015, 6:04 PM
- Cisco (NASDAQ:CSCO) plans to stop selling its Invicta flash storage arrays, and instead focus on offering flash systems from partners (EMC, NetApp, etc.). Those clicking on Google links for Invicta pages on Cisco's site already get redirected to the home page for Cisco's UCS server line.
- The Invicta line was the product of Cisco's $415M 2013 purchase of flash array vendor Whiptail. At the time, Cisco argued Whiptail's hardware was a natural complement to the UCS line, and proclaimed the arrays offered unmatched scalabilitiy/performance. However, from the start, there were concerns the deal would stress Cisco's age-old storage partnerships. Moreover, Cisco was forced to halt Invicta shipments last year due to "quality issues in deployments."
- John Woodall, an exec at Cisco channel partner IAS, thinks Cisco could still use Whiptail's IP in future products. "There's nothing stopping Cisco from using the Whiptail flash technology with UCS as part of a hyper-converged infrastructure appliance."
- The news comes a day after Cisco announced it's selling its set-top unit (another business that has faced its share of challenges) for $600M to Technicolor, and two days before Chuck Robbins officially takes over as CEO. Shares rose 1.4% today (in spite of a 1.1% Nasdaq drop) with the help of Juniper's numbers.
Cisco Systems, Inc. designs, manufactures, and sells Internet Protocol based networking products and services related to the communications and information technology industry. It provides a broad line of products for transporting data, voice, and video within buildings and across campuses. The... More
Industry: Networking & Communication Devices
Country: United States
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