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, 4:09 PM
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
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.
Fri, Sep. 11, 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."
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
Thu, Aug. 13, 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."
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
Thu, Jul. 23, 8:37 AM
- France's Technicolor (OTCQX:TCLRY) is buying the set-top box and cable modem business from Cisco Systems (NASDAQ:CSCO) for €550M (about $600M) in cash and stock, after many Cisco investors called for the company to get out of set-tops entirely despite billions invested.
- About $450M of the deal is in cash and $150M in stock. The deal is expected to close in Q4 or the first quarter of next year, after regulator OKs.
- Set-tops have been in decline, making for a drag on Cisco's video business. Google offloaded its own Motorola Home business to Arris Group for more than $2B last year.
- Premarket: CSCO +1%.
Wed, Jun. 24, 11:54 AM
- Baird has downgraded Fortinet in response to a healthy 2015 run-up, and many security tech peers have joined the company in seeing profit-taking (HACK -1.3%). The Nasdaq is down just 0.1%.
- Decliners include FireEye (FEYE -2.3%), Qualys (QLYS -6.7%), KEYW (KEYW -5.1%), Check Point (CHKP -1.9%), Barracuda (CUDA -2.5%), Vasco (VDSI -2.5%), and Proofpoint (PFPT -1.8%). UBS downgraded FireEye to Neutral two days ago while citing valuation, and also cut Symantec to Sell. RBC has hiked its Qualys target by $6 to $44 today, while reiterating a Sector Perform.
- The selloff comes as an Office of Personnel Management (OPM) official states up to 18M Social Security numbers may have been stolen in a recent breach. FireEye recently ID'd a Chinese group it believes was responsible for the hack.
- Meanwhile, the WSJ has published a column about Check Point's efforts to expand beyond its core firewall market, and thereby keep the likes of Fortinet and Palo Alto Networks at bay. Gartner estimates Check Point had a 22.7% 2014 firewall share, well above #2 Cisco's (NASDAQ:CSCO) 15.9% but down from a 2013 share of 24%.
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
Tue, Jun. 9, 1:42 PM
- Summit Research's Srini Nandury thinks Nimble Storage's (NYSE:NMBL) recent rally has been fueled by M&A hopes ... and considers them justified. He believes Cisco (NASDAQ:CSCO), EMC, and NetApp (NASDAQ:NTAP) could be among the larger OEMs willing to bid for the hybrid storage array upstart.
- Nandury: "Given that Nimble is one of the best Hybrid storage assets in the market, any buyout offer for Nimble will likely trigger a bidding war as we had seen previously with both Data Domain and 3Par. And, given that Nimble is executing solidly in both SMB and enterprise storage environments, and is expected to roll out both NAS and Object storage in the near-term (12-18 months) and will most likely get acquired, we reiterate our BUY rating on the stock and maintain our $40 PT."
- EMC has bought flash array vendors XtremIO and DSSD; Cisco has bought flash vendor Whiptail; and hard drive giants Seagate and Western Digital have also used M&A to expand their flash offerings. NetApp has relied more on internal R&D to flesh out its product line, but the company's recent top-line woes and CEO change have fueled speculation it could turn to M&A.
- Of note: With a market cap of $2.2B (a deal premium could bring it near $3B), Nimble would be digestible for larger industry players, but not cheap.
Wed, May 13, 5:33 PM
- During Cisco's (NASDAQ:CSCO) FQ3 earnings call, John Chambers said he "would not bet" on a security M&A rumor heard today.
- That was an apparent reference to FireEye (NASDAQ:FEYE), whose shares jumped on unconfirmed rumors that Cisco had made a bid.
- FireEye has fallen to $41.71 in AH trading following Chambers' remarks. Shares are still up $0.41 from Monday's close.
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
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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