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Thu, Feb. 11, 1:20 PM
- Even with equity markets selling off once again, Cisco (CSCO +9.8%) has held onto the after-hours gains seen yesterday after the company beat FQ2 estimates, issued in-line FQ3 guidance, announced a $15B buyback hike and $0.05/share dividend hike, and reported product orders rose 2% Y/Y (better than feared).
- Jefferies' George Notter has upgraded Cisco to Buy, and upped his target by $1.50 to $27.50. He cites the dividend hike, a historically low valuation (6.4x Jefferies' base 2017 EPS estimate), a belief Cisco will offset the impact of macro pressures by cutting costs, and lower concerns about emerging markets exposure. He also thinks Cisco "has an opportunity to capture significant new growth opportunities in Security and/or Hyper-converged Storage."
- Raymond James' Simon Leopold (Outperform, $28 target): "We believe Cisco continues to execute well while undertaking a business transition to a more software centric model. Some softening, such as enterprise switching, will fuel worries about the macro-environment, but Cisco’s Service Provider sales provides offsets ... the software story remains attractive: ACI’s run-rate is over $2 billion, SaaS grew in the double digits (WebX, Meraki, Security), and security deferred revenue grew 26%."
- Piper's Troy Jensen (Overweight rating, $30 target): "[W]e continue to believe CSCO’s product portfolio is strengthening in the marketplace ... Also, as shown by the sequential margin improvement we believe the company is making good strides with cost controls. Given the global macro growth concerns we do believe weaker spending habits could prevail in the near future, but with a ~4.6% dividend yield, and a $15B increase to its stock repurchase program, we believe shares are too cheap to ignore."
- Nomura's Jeff Kvaal (Neutral, $30 target) isn't as enthusiastic about Cisco's numbers. "[U]npacking the moving pieces suggests Cisco’s macro concern is indeed showing up in the numbers. Business slowed to below plan immediately entering 2016 across the globe. The greatest impacts were in switching (down 13% QoQ) and former growth driver data center (down 4% QoQ) ... Product deferred revenue growth decelerated from 16% to a still healthy 11% and the book to bill was only approximately 1.0."
- Many analysts are pleased with Cisco's deferred revenue growth - software/subscription growth helped the deferred revenue balance rise 8% Y/Y to $15.2B. On the other hand, the 3% Y/Y drop seen in Data Center (UCS server) sales has been an area of concern - on the earnings call (transcript), CEO Chuck Robbins blamed the decline on macro pressures and tough comps.
- Cisco's core switching business was also soft, declining 4% - the company blamed weak campus switch demand caused by macro issues. Routing revenue rose 5%, collaboration 3%, security 11%, and service provider video (boosted by Chinese demand) 37%. Wireless (Wi-Fi) was flat.
- Cisco's FQ2 results/FQ3 guidance, details and buyback/dividend hike
Thu, Feb. 11, 9:13 AM
- Gainers: DDD +15%. AG +14%. FSM +13%. TRIP +12%. MUX +11%. AUY +11%. SBGL +11%. GFI +10%. AGI +10%. LC +10%. GG +10%. CDE +9%. EGO +9%. KGC +9%. HMY +9%. IAG +9%. EXPE +8%. ABX +8%. NEM +8%. SLW +8%. SSRI 8%. AU 7%. AEM 7%. HL 7%. NG 7%. CSCO 6%. SKX 5%.
- Losers: FLO -18%. INCY -15%. SFL -13%. MYL -13%. BTU -13%. ZNGA -13%. SNOW -11%. IFF -10%. ELMD -9%. AVP -8%. CS -7%. BCS -7%. SUNE -6%. CIG -5%. TWTR -6%.
Wed, Feb. 10, 4:25 PM
- Cisco (NASDAQ:CSCO) has used its FQ2 report to announce it's adding $15B to its buyback program, raising its available funds to $16.9B. That's good for repurchasing over 13% of shares at current levels.
- The company has also hiked its quarterly dividend by $0.05/share (24%) to $0.26/share. That's good for a 4.6% forward yield. The next dividend is payable on April 27 to shareholders on record as of the April 6 close.
- Product revenue rose 2% Y/Y in FQ2 to $9B, and services revenue 3% to $2.9B. Excluding the set-top business, Americas and EMEA revenue rose 1%, and Asia-Pac (under pressure in past quarters due to Chinese weakness) rose 11%.
- Lifting EPS: GAAP operating expenses fell 7% Y/Y to $4.1B. $1.3B was spent on buybacks in FQ2. Cisco ended FQ2 with $60.4B in cash (just $3.9B in the U.S.) and $24.6B in debt.
- Cisco has jumped to $24.46 after hours.
- Cisco's earnings/guidance, earnings release
- Update (6:31PM ET): Cisco stated on its earnings call product orders rose 2% Y/Y in FQ2, a slight slowdown from FQ1's 3%. Enterprise orders -2%, Commercial (SMBs) +4%, Service Provider +5%, Public Sector flat. Asia-Pac orders rose 17%, while Americas orders were flat and EMEA down 1%. Cisco is now up 7.3% after hours.
Wed, Feb. 3, 11:58 AM
- An ITC administrative law judge (ALJ) has ruled (.pdf) Arista (NYSE:ANET) infringes claims within Cisco's (NASDAQ:CSCO) '537, '592, and '145 patents. No violation has been found for asserted claims in Cisco's '597 and '164 patents. The case will now go before the ITC commission.
- Though Cisco is taking a victory lap and declaring the infringed IP "[goes] to the core of Arista's products," analysts aren't worried about the ruling's impact on Arista. Gabelli's Hendi Susanto: "Arista intends to fully address the infringement allegations with a new release of EOS (operating software platform) available for software download in Q2 2016 ... We believe Arista Networks has been working on all potential workaround for all patents in its legal battle against Cisco."
- Stifel's Sanjiv Wadhwani: "Conversations with customers indicate that customers are fine with the result, and do not see it as a material impact." He adds the ALJ will approve or deny Arista's workaround for two of the patents the company was found to infringe in the next 30 days, and that the other patent only covers how external agents interact with Cisco's system database (SysDB), and not a SysDB itself.
- Last week, Arista countersued Cisco, accusing the networking giant of violating antitrust law by engaging in bait-and-switch tactics regarding industry adoption of its CLI commands. An ALJ ruling on a separate Cisco ITC suit against Arista is expected on April 26.
- Arista, hammered more than once since Dec. 2014 on Cisco lawsuit concerns, is rallying on a bad day for tech stocks. Q4 results arrive on Feb. 18.
Mon, Jan. 25, 5:41 PM
Wed, Jan. 20, 11:47 AM
- Tech large-caps aren't being spared as the Nasdaq drops 2.6%, and the S&P 2.7%, in the market's latest plunge. A slew of companies with $10B+ market caps are seeing declines that on many recent days were largely reserved for smaller ex-momentum plays.
- The casualty list includes Alibaba (BABA -5.3%), and that of course means Yahoo (YHOO -6%) is along for the ride. Top Alibaba rival JD.com (JD -6.2%) is also down strongly; Chinese macro fears continue to run high.
- Facebook (FB -4.9%), which (unlike most peers) remains well above where it traded 12 months ago, has fallen towards $90. Q4 results arrive on Jan. 27.
- Cisco (CSCO -5.2%) has fallen below $23. Possibly weighing: Piper's Troy Jensen has reported weak Q4 networking reseller survey results, and predicts Cisco will issue light FQ3 (April quarter) guidance next month with its FQ2 report. His FQ3 sales estimate has been cut by $400M to $11.9B (below a $12.07B consensus).
- DRAM/NAND flash maker Micron (MU -10.3%) is among the biggest decliners, with shares falling into the single digits. Micron now trades for 6.6x an FY17 (ends Aug. '17) EPS consensus of $1.48. Online payments leader PayPal (PYPL -4.4%) is having a rough day as well.
- IBM (IBM -4.7%), meanwhile, has made new multi-year lows after providing soft 2016 EPS guidance to go with a slight Q4 beat. Netflix (NFLX -6%) has sold off in spite of reporting strong Q4 subscriber adds.
Dec. 2, 2015, 12:52 PM
- Nimble Storage (NYSE:NMBL) has unveiled new hardware/software reference designs (referred to as Cisco Validated Designs) that pair Nimble's flash/disk arrays with Cisco's (NASDAQ:CSCO) UCS servers, data center switches, and ONE management software. The company has also introduced a reference architecture for using its arrays and Cisco gear with Microsoft's SQL Server 2014 database.
- Nimble states its SmartStack offerings (they make use of Cisco hardware) have been deployed by 750+ enterprises to date. The solutions have been aimed at mid-sized firms, along with larger enterprises with departmental or distributed environments. Future designs "will target a range of large-scale enterprise use cases such as virtual infrastructure, virtual desktop infrastructure, databases, and other mission-critical deployments that use the entire family of products, including the Nimble CS700 [Fibre Channel] array."
- Shares remain down 46% from where they traded before Nimble missed FQ3 estimates and issued soft guidance on Nov. 19.
Nov. 13, 2015, 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."
Nov. 13, 2015, 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
Nov. 12, 2015, 4:09 PM
- Cisco (NASDAQ:CSCO): FQ1 EPS of $0.59 beats by $0.03.
- Revenue of $12.68B (+3.6% Y/Y) beats by $30M.
- Expects 0%-2% Y/Y FQ2 revenue growth and EPS of $0.53-$0.55. Consensus is for 5.1% revenue growth and EPS of $0.56.
- Shares -3.3% after hours.
Oct. 15, 2015, 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
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. 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. 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."
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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