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
Thu, Aug. 13, 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
Wed, Aug. 12, 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
Wed, Aug. 12, 4:06 PM
Tue, Aug. 11, 5:35 PM
Thu, Jul. 23, 7:33 PM
- Juniper (NYSE:JNPR) has made fresh 52-week highs after beating Q2 estimates with the help of a slight Y/Y increase in Service Provider revenue (contrasts with an 8% Q1 drop). In addition, Q3 guidance is for revenue of $1.23B (+/- $20M) and EPS of $0.50-$0.54, above a consensus of $1.16B and $0.46.
- Business line/segment performance: Routing revenue -3% to $602.4M; switching -5% to $190.2M; security -4% to $107.1M. Service provider revenue up fractionally to $835.3M; enterprise -3% to $386.9M.
- Financials: $600M was spent on buybacks, and another $500M has been added to Juniper's authorization, bringing its size back up to $675M. Thanks to job cuts, R&D, sales/marketing, and G&A spend respectively fell by $3.9M, $25.6M, and $4.3M Y/Y to $251.6M, $232.4M, and $56.3M. Juniper ended Q2 with $3.08B in cash/investments, and $1.95B in debt.
- Archrival Cisco (NASDAQ:CSCO) is following Juniper higher AH. Cisco rose 1.7% in regular trading after announcing it's selling its set-top unit (has been seeing major sales declines/share loss) to Technicolor for $600M. The company remains a major provider of infrastructure hardware and software - for example, the cloud-based Videoscape platform - to pay-TV providers.
- Juniper's Q2 results, PR
Tue, Jun. 23, 8:25 AM
- In tandem with its FQ1 report, BlackBerry (NASDAQ:BBRY) has announced a patent cross-licensing deal with Cisco (NASDAQ:CSCO) that will result in BlackBerry getting a license fee; other terms are confidential. The company has also announced pharma industry exec Laurie Smaldone will replace Procter & Gamble vet Claudia Kotchka on the board.
- Segment performance: Though FQ1 revenue missed estimates, software/tech licensing revenue (closely watched) was strong, rising 150% Y/Y to $137M and totaling 21% of revenue vs. 10% in FQ4. Services (hurt by fee cuts) fell to 38% of revenue from FQ4's 47%, and hardware to 40% from 42%.
- Revenue was recognized on 1.1M phone sales, down from 1.3M in FQ4 and 1.6M a year ago; ASP rose $29 Q/Q to $240. 2,600 enterprise customer wins were recorded; 45% of software licenses for the deals were cross-platform.
- Geographic performance: Thanks to the software growth, North American revenue rose 3% Y/Y to $285M. EMEA revenue fell 41% to $245M, Latin America 66% to $42M, and Asia-Pac 43% to $86M.
- Financials: Cost cuts remain aggressive: R&D spend fell 41% Y/Y to $139M, and SG&A 56% to $174M. GAAP Gross margin was 47.1% vs. 48.2% in FQ4 and 46.7% a year ago; non-GAAP GM was 50.3%. The cash balance rose by $50M Q/Q to $3.32B; debt stands at $1.25B.
- Free cash flow was $123M. BlackBerry "continues to target sustainable non-GAAP profitability some time in fiscal 2016."
- Shares have risen to $9.70 premarket. They had sold off in the weeks going into earnings.
- FQ1 results, PR
Wed, May 13, 5:00 PM
- Cisco (NASDAQ:CSCO) guides on its FQ3 CC (webcast) for 1%-3% Y/Y FQ4 revenue growth and EPS of $0.55-$0.57, in-line with a consensus for 1.9% growth and EPS of $0.56.
- Product orders rose only 2% Y/Y in FQ3, a slowdown from FQ2's 5%. Service provider orders (-7%, with U.S. down 17%) remain a weak spot, as do emerging markets (flat, with BRIC markets declining). Enterprise and public sector orders (up 7% apiece, with U.S. orders respectively rising 21% and 24%) were healthier, as were SMB orders (+6%). Americas and EMEA orders were both up 2%, and Asia-Pac 1% (8% exc. China).
- Product line performance: Switching revenue +6% Y/Y in FQ3 to $3.56B. Routing +4% to $2B. Collaboration +7% to $973M. Service provider video -5% to $914M. Data center (UCS servers) +21% to $801M. Wireless +9% to $611M. Security +14% to $412M.
- Some strong points: 1) Meraki Wi-Fi hardware/software sales rose 92% Y/Y. 2) Orders for Cisco's APIC SDN controllers rose 27% Q/Q, and APIC customer count to 580 from 300+. 3) Security order growth (benefiting from broader cybersecurity demand) topped revenue growth. 4) In spite of soft carrier capex, high-end routing rose 5%, driven by CRS-X and NCS core router demand.
- CSCO now -1% AH to $29.06.
- FQ3 results, details
Wed, May 13, 4:26 PM
- Cisco's (NASDAQ:CSCO) product sales continued rebounding in FQ3 following a late-2013/early-2014 slump: They rose 6% Y/Y to $9.33B. Services revenue (relatively stable) rose 3% to $2.81B.
- Financials: Gross margin came in at 62.5%, topping guidance of 61%-62% and boosting EPS. GM was up 80 bps Q/Q and down 20 bps Y/Y. Thanks in part to job cuts, GAAP operating expenses rose a modest 3% Y/Y to $4.6B - $2.4B was spent on sales/marketing, $1.5B on R&D, and $510M on G&A. The deferred revenue balance rose 8% Y/Y to $14.2B.
- $1B was spent on buybacks, down slightly from FQ2's $1.2B. $5.3B is currently left on Cisco's buyback authorization. Cisco ended FQ3 with $54.4B in cash (much of it offshore), and $21B in debt.
- CSCO -0.2% AH - many expected solid numbers. CC at 4:30PM ET (webcast), guidance will be provided.
- FQ3 results, PR
Wed, May 13, 4:06 PM
Wed, May 13, 9:26 AM
- EZchip (NASDAQ:EZCH) uses its Q1 report to state its largest customer (i.e. Cisco) doesn't currently plan to use EZchip's NPS-400 network processor (NPU) in its next-gen edge router line cards.
- The company adds Cisco (NASDAQ:CSCO) recently began using EZchip's NP-5 NPU (entered production in late 2014), that it doesn't think "a next generation successor for the NP-5 is likely to ship for approximately three years," and that the NP-5 is expected to "continue generating revenues at this customer for several more years beyond this three year period."
- Concerns that Cisco could drop EZchip in favor of an in-house NPU have been around since the networking giant unveiled its nPower X1 NPU in Sep. 2013. At the time, EZchip said it believes Cisco hasn't made a decision on which processor will succeed the NP-5.
- Today, EZchip says it believes Cisco's next-gen edge router line cards will require more throughput than is provided by the NPS-400 (480 Gbps), and that Cisco is "currently developing such a solution in-house." EZchip, for its part, is working on an NPS-400 successor (the 1Tbps NPS-1000) that it hopes to sell Cisco on. The NPS-400 begins sampling in 2H15, and is being considered for other platforms at Cisco (as well as other clients).
- EZchip has tumbled to $14.28 in premarket trading.
- Q1 results, PR
Tue, May 12, 5:35 PM
Thu, Feb. 12, 2:00 PM
- At least six firms have upped their Cisco (CSCO +8.7%) targets in response to the company's FQ2 beat, in-line guidance, and healthy product orders. Shares are at their highest levels since 2007.
- "We came away from the call with greater confidence in Cisco's technology leadership, execution and recovery trajectory," writes Oppenheimer (Buy). "While the headwinds in emerging markets and service provider are likely to remain in place, we believe that by now they are well reflected in estimates."
- William Blair (Outperform): "While Cisco clearly benefited from easy comparisons across its business and several major product cycles, we nonetheless walked away with increased confidence in the company's business momentum, growth prospects and strategic positioning."
- Sterne Agee (Buy): "The biggest takeaway that should drive incremental support in the stock near term is the improving tone on emerging markets (India plus 11%, Mexico plus 21%) along with U.S. commercial strength up 12% against a relatively tough comp (total Americas up 7% along with EMEA up 7%)."
- Deutsche (Buy) believes Cisco businesses responsible for half of sales - data center switching, security, services, and Wi-Fi - can post growth "2x or higher" than GDP growth. Credit Suisse (Underperform) remains bearish on a belief SDN will begin having a bigger impact on Cisco's sales and margins over the next 12-18 months.
- John Chambers mentioned yesterday Cisco now has 300+ customers for its APIC SDN controller. The remarks come after VMware reported paid customer count for its rival NSX platform rose 60% Q/Q in Q4 to 400+. Facebook, meanwhile, has just revealed a new modular switch platform for its open-source Open Compute Project.
- Prior Cisco earnings coverage
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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