Nov. 11, 2014, 5:35 PM
Nov. 10, 2014, 9:51 AM
- Declaring its Project VIP network expansion effort ahead of schedule, AT&T has set a 2015 capex budget of $18B, down from 2014's $21B and below a prior forecast of $20B. The figure is equal to only 13% of AT&T's 2015 revenue consensus.
- Telecom equipment and optical component makers, many of whom have already felt the effects of AT&T's subdued 2014 wireline capex, are off in early trading. CSCO -1.4%. ALU -4.8%. CIEN -6.6%. ADTN -7.8%. JNPR -2.5%. RKUS -2.1%. SONS -2.9%. FNSR -2.9%. JDSU -1.1%. RKUS -2.1%. XXIA -2%. FFIV -1.6%. ERIC -1.7%.
- Cisco delivers its FQ1 report on Wednesday. The networking giant reported an 11% Y/Y FQ4 drop in service provider orders, thanks to both weak demand and share loss.
Oct. 22, 2014, 9:28 AM
- Confirming yesterday's Bloomberg report, Cisco (NASDAQ:CSCO) and EMC state the latter will take control of the companies' VCE JV. Cisco's stake will be cut to 10% from 35%, VMware (currently has a sub-10% stake) will maintain an interest, and the business will be included in EMC's income statement after the deal closes in Q4.
- The companies add VCE was on a $2B/year run rate for its Vblock converged server/storage/networking systems exiting Q3, and that the quarter was its sixth consecutive one of 50%+ Y/Y growth. VCE previously forecast 2014 sales of $1.8B. Gartner and IDC have ranked VCE the leader in a converged infrastructure market that also features Oracle, H-P, IBM, and Dell.
- The Vblock like makes use of Cisco's servers and data center switches, EMC's storage systems, and VMware's virtualization and systems management software. Cisco, EMC, and VCE have "existing and renewed multi-year engineering, resell and support agreements" between them.
- Nonetheless, Cisco's decision to cut its VCE stake could pave the way for it to directly compete against Vblock through its UCS server ops, particularly given the recent launch of the UCS Mini (less powerful than Vblock hardware, but also a converged system).
- Separately, EMC has issued nearly in-line guidance to go with its its mixed Q3 results: The company expects 2014 revenue of $24.5B and EPS of $1.90 vs. a consensus of $24.54B and $1.91.
- EMC +0.7% premarket. CSCO +0.3%.
Oct. 21, 2014, 7:48 PM
- Bloomberg reports EMC plans to announce tomorrow it's buying out much of Cisco's (NASDAQ:CSCO) stake in the companies' VCE JV, which sells high-end integrated server/storage/networking systems (the Vblock line). EMC owns 58% of VCE, and Cisco 35%.
- The report shortly follows a statement from EMC that the company will be announcing a "new business development" tomorrow, to go with its Q3 report.
- Taking a larger stake in VCE would allow EMC to recognize the fast-growing unit's sales in its quarterly results at a time when its standalone storage hardware sales remain pressured by high-end weakness. In May, VCE predicted its sales would rise 80% in 2014 to $1.8B.
- Cisco stated in July it had invested $716M in VCE, and recorded $644M in losses related to it, since the JV's 2010 founding. CRN reported two weeks ago Cisco is thinking of "ending further financial investment in VCE."
- Letting EMC take control of VCE would leave Cisco's server efforts focused on its UCS blade/rack server line (leveraged by VCE), which has been growing quickly itself and is now on a $3B/year run rate. Cisco recently added an integrated system to its UCS lineup (the UCS Mini), albeit one less powerful than VCE's systems.
- EMC is now only up 1.1% AH. Shares were previously higher on hopes the "new business development" would be a VMware (NYSE:VMW) spinoff. VMware, meanwhile, is now only down 1.4% AH after providing light Q4 guidance.
Oct. 20, 2014, 2:28 PM
- Cisco (CSCO -1.7%), VMware (VMW -1.5%), F5 (FFIV -1.5%), NetApp (NTAP -1.5%), Teradata (TDC -3.3%), and SGI (SGI -3.5%) have joined several other enterprise tech names in declining after IBM and SAP each posted disappointing Q3 reports. The Nasdaq is up 1% on the day.
- IBM provided a smorgasbord of bad news: A Q3 miss, soft full-year guidance, the pulling of a $20/share 2015 EPS target, a 15% Y/Y hardware revenue decline, and a 7% Y/Y services backlog drop. In addition, the IT giant said it "saw a marked slowdown in September in client buying behavior."
- Citing the impact of a shift in customer spending towards subscription-based cloud apps from on-premise software (typically paid through an up-front license fee), SAP slashed its full-year op. profit forecast. Q3 revenue was slightly below consensus, and EPS in-line.
- VMware reports tomorrow, F5 on Thursday, SGI on Oct. 29, and Teradata on Nov. 6.
Oct. 10, 2014, 10:58 AM
- Telecom equipment makers and their chip/component suppliers are seeing more pain after Juniper (JNPR -7.5%) and Procera (PKT -32%) issued Q3 warnings (I, II), the latest bad earnings news for an industry that has seen plenty due to soft wireline capex. A few enterprise-focused networking vendors are also having a rough day.
- Cisco (CSCO -3.1%) has fallen below $23.50, and Alcatel-Lucent (ALU -4.3%) below $2.50. Other decliners: CIEN -4.7%. JDSU -4.6%. FFIV -5.3%. ANET -7%. RKUS -5.7%. SONS -4.4%. INFN -2.4%. CYNI -3.5%. AMCC -10%. PMCS -3.4%. NPTN -7.7%.
- Analysts are defending Juniper, arguing (in remarks that also have implications for peers) bad news has been priced in and that telecom capex is likely to improve in 2015. Bulls have argued Web/mobile traffic growth and SDN/NFV investments will ultimately boost capex, in spite of industry service revenue pressures.
- The Nasdaq as a whole is down 1.2%. Chip stocks are off sharply following Microchip's warning and prediction of an industry correction.
- Yesterday: Telecom equipment stocks slump as capex worries persist
Oct. 8, 2014, 11:28 AM
- BI reports Cisco (CSCO -1.6%) is carrying out "a huge reorganization" of its switching and routing engineering ops, a move that affects up to 25K employees (~1/3 of its workforce).
- Engineering teams currently focused on individual products are reportedly being moved into "two big overarching teams with one group focused on software, the other on hardware." Cisco's goal: "To get rid of all the little product "fiefdoms" that have cropped up under the product/general manager system at Cisco over the years." Microsoft's 2013 reorg had a similar objective.
- However, BI adds Cisco's reorg has bred "a lot of confusion and frustration," and that "resumes are flying out." The report follows August's job cut announcement.
- As it is, Cisco has seen several prominent execs leave the company over the last two months. Among them: 1) Data center/virtualization system engineering chief Dom Delfino left for VMware. 2) Cloud engineering exec Kyle Mestery (responsible for Cisco's OpenStack strategy) has left for H-P. 3) Security product SVP Chris Young has left to become the head of Intel's security product ops. 4) Jeff White, an exec holding positions in two large Cisco units, is now Extreme Networks' sales chief.
Sep. 29, 2014, 1:36 PM
- More than 30 new partners have been added for Cisco's (CSCO +0.6%) InterCloud platform, which aims to create a global network of cloud service providers (using Cisco hardware/software) that companies can migrate cloud workloads between. The new partners include BT, Deutsche Telekom, NTT, and Equinix, and collectively bring 250 data centers in 50 countries.
- In Equinix's (EQIX +0.7%) case, Cisco is partnering with the data center owner to offer an InterCloud-based private cloud solution (hosted in Equinix's data centers) that will support high-speed connections to other cloud service providers via Equnix's Cloud Exchange. Equinix already has direct connection deals with Amazon and Microsoft.
- Cisco, looking to play catch-up against Amazon, Microsoft, Google, and others, has already committed to spending $1B on InterCloud over the next two years.
- The company also recently bought Metacloud, a provider of software that allows companies to quickly build private clouds based on the popular OpenStack platform. The deal allows Cisco to provide a cloud infrastructure software solution to InterCloud partners, and to companies deploying UCS servers to handle cloud services.
- New InterCloud partners were also announced in May. At that time, the list included NetApp, Accenture, Sungard Data, and Johnson Controls.
Sep. 24, 2014, 2:33 PM
- John Chambers has dismissed speculation Cisco (CSCO +1.3%) could make a bid for EMC (EMC -1.1%). "If [EMC CEO Joe Tucci] and I were going to do something here, we would have done it a year or two ago."
- Likely an issue today: A Cisco deal would raise antitrust issues in the network virtualization/SDN software space, where VMware (VMW -0.3%) and Cisco have emerged as the early leaders. Also, Cisco's storage networking unit relies on OEM deals with EMC rivals (in addition to EMC).
- Meanwhile, re/code reports Oracle (ORCL +1.5%), another company whose name was thrown around in EMC deal speculation, is also uninterested.
- Recent reports stated EMC has held merger talks with H-P, but failed to agree (for now, anyway) on a price. Sources (possibly hoping to drum up M&A interest in EMC) added a deal with Cisco or Oracle was also possible. Re/code backs up the part about the H-P talks, while adding H-P was largely interested in owning VMware VMW via EMC.
- Many on the Street still think EMC will make a deal before Tucci's planned Feb. 2015 retirement. Tucci hasn't named a successor yet; Argus' Jim Kelleher consider ex-CFO David Goulden, now the head of EMC's storage hardware/software unit, to be the favorite. VMware CEO Pat Gelsinger and Pivotal CEO Paul Maritz are also in the running.
Sep. 17, 2014, 8:24 AM
- Cisco (NASDAQ:CSCO) has announced its intent to acquire Metacloud, a privately held company which deploys and operates private clouds for global organizations.
- Since announcing its Intercloud strategy this past March, Cisco has been enlisting key technology partners and service and cloud providers, to accelerate the company's strategy to build the world's largest global Intercloud.
- Metacloud's OpenStack-based cloud platform already delivers and remotely operates production-ready private clouds in a customer's data center.
- The acquisition of Metacloud is expected to be completed in Q1 of FY2015.
Sep. 4, 2014, 2:33 PM
- In what the company is calling the biggest refresh for its UCS server line since its '09 introduction, Cisco (CSCO -0.4%) has added two new product lines, refreshed its existing lines, and launched new tools for handling big data/analytics deployments.
- The new UCS M-Series modular server line is getting the most attention: It supports up to 8 computing cartridges (each containing 2 Intel Xeon CPUs) in a small 2U chassis, all of which share the same storage and networking resources.
- UCS chief Todd Brannon: "To upgrade the server, just replace the cartridge ... This really kind of fundamentally breaks apart what a server is." Cisco has already worked to differentiate the UCS line through integrated networking features that improve virtualization performance. Intel, H-P, and Facebook have their own modular server efforts.
- Also launched: 1) The UCS Mini, an integrated server/storage/networking system meant for remote/branch offices and SMBs. Cisco/EMC's VCE JV offers more powerful integrated hardware. 2) UCS Director Express, software that automates Hadoop big data project deployments on UCS servers. 3) A partnership with Red Hat (RHT -0.3%) to create integrated hardware/software offerings for OpenStack cloud infrastructure deployments.
- UCS has been a bright spot for Cisco as it contends with soft carrier and emerging markets switch/router sales: IDC estimates Cisco's server revenue rose 35% Y/Y in Q2, leading its share to rise 140 bps to 5.8%. John Chambers recently mentioned UCS is now on a $3B/year run rate.
Aug. 27, 2014, 7:21 PM
- IDC estimates global server sales rose 2.5% Y/Y in Q2 to $12.6B. That marks a turnaround from the 2.2% drop seen in Q1, and the 4.4% drop seen in Q4. Gartner estimates sales grew 2.8%.
- IDC declares the server market, hurt in recent quarters by system consolidation and a shift in demand towards the white-label gear beloved by Web giants (referred to by IDC as ODM Direct), is seeing "the beginning of a cyclical refresh cycle." It sees the pending launch of Intel's (NASDAQ:INTC) Grantley Xeon CPUs, along with Microsoft's plans to end Windows Server 2003 support, lifting sales into 2015.
- Sales of x86 servers (mostly Intel-based) rose 7.8% in Q2, and now make up 78% of industry revenue. Non-x86 server sales fell 12.8%.
- Market leader H-P's (NYSE:HPQ) share rose 40 bps Y/Y to 25.4%, with x86 growth offsetting Itanium weakness. #2 IBM's share fell 340 bps to 23.6% ahead of the sale of its x86 server ops to Lenovo; on the bright side, IBM's decline narrowed from Q1's 600 bps.
- #3 Dell's share fell 160 bps to 16.2%. #4 Oracle's (NYSE:ORCL) grew 10 bps to 5.9%, with engineered system growth offsetting declines for older UNIX/SPARC server lines. #5 Cisco (NASDAQ:CSCO), which recently proclaimed its UCS server ops are on a $3B/year run rate, saw its share rise 140 bps to 5.8% on the back of 35% growth. Cisco should pass Oracle in a quarter or two.
- ODM Direct vendors saw their share grow 110 bps to 6.6%. The shares of all other vendors rose 190 bps to 16.1%.
- Related tickers: SMCI, MLNX, QLGC, ELX
Aug. 27, 2014, 11:03 AM
Aug. 14, 2014, 12:40 PM
- Six firms have hiked their Cisco (CSCO -2.8%) targets after the company beat FQ4 estimates, issued mixed FQ1 guidance, and announced plans to cut another 6K jobs. But that isn't stopping shares from selling off due to worries about weak demand from carriers (orders -11% Y/Y) and emerging markets (orders -9%).
- "Notwithstanding the fact that capex will be fairly weak in [2H14], Cisco's [carrier] order performance in the first calendar half of 2014 demonstrates meaningful share loss in addition to soft carrier spending," says MKM (Neutral).
- Nonetheless, the firm thinks Cisco's total orders will rise at or near a low double-digit % in FQ1 (favorable comps will help). "We still believe it is profitable to own Cisco when orders and revenue growth are accelerating."
- Bulls are focusing on healthy enterprise orders and strong early uptake for the Nexus 9000/ACI SDN and networking virtualization platform. John Chambers mentioned on the CC (transcript) the platform's customer count more than tripled in FQ4 to 580+, and that there are over 60 customers for the related APIC software controller (just launched).
- Several peers and suppliers with strong carrier exposure are selling off. Cisco's numbers follow a soft outlook from JDS Uniphase, and coincide with light guidance from Oclaro. ALU -1.6%. JNPR -1.8%. FN -7.4%. ZHNE -2.1%. EZCH -3.8%.
- Prior Cisco earnings coverage
Aug. 13, 2014, 5:03 PM
- Cisco (NASDAQ:CSCO) guides on its FQ4 CC for flat to 1% Y/Y FQ1 revenue growth and FQ1 EPS of $0.51-$0.53 vs. a consensus for flat growth and EPS of $0.53. Gross margin is expected to be in a range of 61%-62% vs. 61.8% in FQ4.
- Cisco plans to cut another 6K jobs (8% of the workforce), and to record a $0.14-$0.18 FQ1 GAAP EPS charge.
- John Chambers has offered cautious remarks about service provider and emerging markets demand. Carrier sales are expected to be weak for the next several quarters, and Cisco isn't expecting a major near-term recovery in emerging markets demand.
- Total product orders only rose 1% Y/Y in FQ4. Americas orders +2%, EMEA +2%, Asia-Pac -7%. Enterprise orders +9%, SMBs +8%, public sector flat, service provider -11%.
- U.S. orders +5% (strong enterprise/SMB demand) and India +18%, but China -23% and other emerging Asian markets -34%.
- Weak points: Routing revenue -7% Y/Y, switching -4%, service provider video -10%, collaboration -4%. Strong points: Data center +30% (UCS servers now on a $3B/year run rate), security +29% (boosted by SourceFire).
- CSCO -1.1% AH. FQ4 results, details
Aug. 13, 2014, 4:18 PM
- Cisco (NASDAQ:CSCO) had an FQ4 gross margin of 61.8%, -90 bps Q/Q and -30 bps Y/Y, but in-line with guidance of 61%-62%.
- Product revenue -2% Y/Y to $9.53B, a much smaller decline than FQ3's 8%. Service revenue (fueled by past product sales) rose 5% to $2.83B, better than FQ3's 3%.
- GAAP opex +4% Y/Y to $4.7B. R&D spend +5% to $1.6B, sales/marketing +5% to $2.5B, G&A -14% to $508M.
- Free cash flow was $3.3B, above net income of $2.8B. The deferred revenue balance (boosted by software/services) rose 5% Y/Y to $14.1B.
- $1.5B was spent on buybacks vs. $2B in FQ3. Cisco ended FQ4 with $52.1B in cash/investments, and $20.9B in debt.
- CC at 4:30PM, guidance will be provided.
- CSCO +0.8% AH. FQ4 results, PR.
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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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