Dec. 1, 2014, 6:47 PM
- During a talk with Chris Dedicoat, the president of Cisco's (NASDAQ:CSCO) EMEA ops, UBS' Amitabh Passi sensed "increasing confidence and momentum in switching (Nexus 9k, 10g-40g), software-defined networking (ACI), data center, mobility, and edge routing (ASR 9k)."
- Passi has hiked his target by $2.50 to $30.50, and predicts Cisco will narrow its valuation gap relative to large-cap tech peers such as Microsoft and Intel. He admits Russia and Asia remain "challenging" regions for the company, but doesn't expect them to get any worse.
- Cisco's Asia-Pac orders fell 12% Y/Y in FQ1, thanks in part to a 33% drop in Chinese orders. The Nexus 9000 line, which plays a key role in Cisco's ACI/APIC SDN and networking virtualization platform, was an area of strength, with paid customers rising to 900+ from 580 at the end of FQ4.
- Strong ASR 9000 demand is a positive for network processor supplier EZchip (NASDAQ:EZCH). The edge router line saw double-digit order growth in FQ1, even as broader carrier router demand continued falling.
Nov. 22, 2014, 3:37 PM
- The Rayno Report states Verizon (NYSE:VZ) has launched a major trial of bare-metal (commodity) switches running on a networking OS and SDN switching software respectively supplied by startups Cumulus Networks and Pica8.
- Light Reading backs up the report, while adding Verizon "aims to determine whether bare-metal switches ... could eventually replace more expensive, proprietary Juniper Networks Inc. (NYSE:JNPR) equipment." Nonetheless, Rayno reports Juniper is a part of the trial, supplying "routing and switching technology that helps tie the network together with VXLAN [networking virtualization] technology."
- Though the trial is in its early stages, both sites report hearing it's a big deal, given the potential for bare-metal/white-box gear to replace proprietary hardware on a large scale. "[Verizon] can reduce their costs massively," says a Rayno source. The trial coincides with the deployment by Verizon's cloud services ops of an SDN solution using server-based hardware from Super Micro (NASDAQ:SMCI).
- Cisco (NASDAQ:CSCO), which maintains a 60%+ data center switch share and a leading position in the carrier router market, has already called white-box hardware its biggest threat. Internet giants have been quick to embrace SDN/white-box solutions - Facebook has even open-sourced a data center switch design - and AT&T is looking to adopt SDN through its Domain 2.0 initiative.
- Cisco's recently-launched ACI/APIC SDN/networking virtualization solution is gaining traction within the company's enterprise base, but critics call it too expensive/proprietary - pricing for an APIC controller runs from $40K-$58K, and software licenses for ACI-capable switches run from $3K-$15K. Meanwhile, Verizon, AT&T, and other carriers are hungry to cut wireline capex.
- Juniper has adopted an SDN strategy that's more friendly to open platforms, but there might be some internal dissent on that front. Rayno reports recently-ousted CEO Shaygan Kheradpir "was more pro-SDN than the existing Juniper management, which is more conservative about protecting its installed base."
Nov. 18, 2014, 2:53 PM
- Looking to halt ongoing collaboration revenue declines - sales fell 10% Y/Y last quarter to $871M - Cisco (CSCO +0.7%) has launched a new high-end telepresence system (the IX5000) for conference rooms, as well as a new VoIP/videoconferencing terminal for mid-sized firms (the BE6000S).
- The networking giant has also unveiled Project Squared, a Web/mobile platform that leverages existing collaboration products (WebEx, telepresence, unified communications, etc.) to create an online workspace for users to communicate and share messages/files.
- Cisco claims the IX5000, which features three 70" screens and 4K cameras, requires half the bandwidth of rival three-screen telepresence systems. A partnership has been formed with cloud storage/file-sharing startup BOX to integrate the company's services with Project Squared.
- Both Cisco's telepresence and unified communications sales have been under pressure amid tough competition from the likes of Polycom (PLCM +0.5%) and Microsoft, as well as various startups. On the FQ1 CC (transcript), John Chambers noted Cisco wants to shift more of its collaboration revenue to comprehensive enterprise license agreements/subscriptions.
Nov. 13, 2014, 11:36 AM
- "In the context of the considerable headwinds Cisco (NASDAQ:CSCO) currently faces, the results this quarter were quite solid," writes BMO (Outperform) following Cisco's FQ1 report. With soft carrier (orders -10% Y/Y) and emerging markets (BRIC/Mexico orders -12%) demand already telegraphed by Cisco and peers, investors are giving the company a pass for its light FQ2 guidance.
- RBC (Outperform): "Strong GM improvements and the rebound in switching point to encouraging trends for Cisco, which is also squeezing out added workforce productivity." Atlantic Equities (Overweight): "At 11x PE 2015E and 8x EV/FCF, Cisco’s valuation appears undemanding among other large cap tech stocks, especially given its 7% earnings CAGR 2014-17E."
- Bears remain worried about sales growth and the long-term impact of SDN. Citi (Sell): "We continue to believe Cisco remains a flat to low-single-digit grower with little upside to op margin. We therefore believe the current 12x P/E more than compensates for the 3% dividend, yet slowing buyback.”
- JPMorgan (Underweight): "We continue to believe current switching industry ASPs and margins are unsustainable due to structural technology shifts." For its part, Cisco disclosed its ACI/APIC SDN/networking virtualization solution saw its paid customer count more than double in its first full quarter of shipments. VMware is seeing growing demand for its rival NSX platform.
- FQ1 product performance: Switching +3% Y/Y to $3.85B (strong data center switch sales); routing -4% to $1.95B (carrier weakness); collaboration -10% to $949M (telepresence weakness); service provider video -12% to $871M (set-top weakness); data center +15% to $693M (server share gains); wireless +11% to $605M (strong Meraki sales); security +25% to $455M (boosted by the SourceFire acquisition).
- Prior Cisco earnings coverage
Nov. 12, 2014, 4:50 PM
- Cisco (NASDAQ:CSCO) guides on its FQ1 CC (webcast) for 4%-7% Y/Y FQ2 revenue growth and EPS of $0.50-$0.52. That's below a consensus for 8.4% revenue growth and EPS of $0.53.
- John Chambers states the forecast reflects an "added measure of conservativeness" regarding weak U.S. carrier spending. Cisco traded lower on Monday after AT&T forecast its capex would fall by $3B in 2015.
- Cisco's total product orders rose 1% Y/Y in FQ1, even with FQ4's clip. Americas +2%, EMEA +6%, Asia-Pac/Japan -12%.
- U.S. orders rose 3% Y/Y thanks to public sector (+22%) and SMB (+7%) strength, but U.S. service provider orders fell 18%.
- CSCO -0.6% AH. FQ1 results, details.
Nov. 12, 2014, 4:18 PM
- Along with its FQ1 results, Cisco (NASDAQ:CSCO) announces CFO Frank Calderoni is leaving at the end of 2014. Business technology/operations finance SVP Kelly A. Kramer will replace him.
- FQ1 gross margin was 63.3%, +150 bps Q/Q and +30 bps Y/Y, and above guidance of 61%-62%.
- Product revenue rose fractionally Y/Y to $9.44B, after declining 2% in FQ4. Services revenue (driven by past sales, more stable) rose 5% to $2.8B, an even growth rate with FQ4.
- GAAP opex rose 1% Y/Y to $4.99B. $1B was spent on buybacks; $1.5B had been spent in FQ4.
- FQ1 results, PR
Nov. 12, 2014, 4:06 PM
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.
CSCO vs. ETF Alternatives
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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