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Cisco Systems, Inc. (CSCO)

  • Jun. 11, 2014, 1:19 PM
    • Cisco (CSCO +0.1%) is hatching a major reorg that could include a retirement announcement from John Chambers as soon as September, "several sources close to the company" tell veteran industry journalist Scott Raynovich.
    • Chambers, 65, stated in 2012 he might retire in 2-4 years. Cisco's recent challenges, together with long-term concerns about the threats posed by white-label hardware and SDN, have heightened speculation Chambers might call it quits.
    • Sales chief Rob Lloyd and COO Gary B. Moore are seen as the frontrunners to succeed Chambers, after both were given the title of president in 2012.
    • The fact Cisco shares have largely been range-bound since 2004 (in spite of huge buybacks) has fueled criticism of Chambers' performance.
  • Jun. 6, 2014, 7:12 PM
    • Responding to comments from John Chambers and other Cisco (CSCO) execs suggesting VMware (VMW) has only a handful of paying clients for its NSX software-defined networking (SDN) platform, VMware CEO Pat Gelsinger recently declared NSX's client base has hit 100.
    • Gelsinger: "Some [clients] are in prototypes, some are in full deployment, but they’re paying customers." He adds two older VMware SDN clients, Rackspace and eBay, are "at dramatic production scale," and that many customers use NSX to create a secure network within a network.
    • Also: Gelsinger claims Cisco's shots at VMware are good PR. "Cisco declared us public enemy No. 1, so all of a sudden every customer, every purchasing agent, has to say, ‘What’s going on over there?’"
    • NSX, backed by many Cisco rivals and enabled by VMware's 2012 acquisition of early SDN leader Nicira, can be used to enable networks running on commodity gear, rather than proprietary/high-margin hardware from Cisco and others.
    • Cisco is countering with its Insieme/ACI platform, which it argues delivers (thanks to hardware/software integration) better network/app visibility and simpler management. VMware and other critics assert it's much costlier.
  • May. 30, 2014, 6:41 PM
    • IDC estimates global server sales fell 2.2% Y/Y in Q1, a slightly smaller decline than the 4.4% drop seen in Q4. Gartner, however, puts the decline at 4.1%.
    • The embrace of white-label hardware by Web giants continues taking a heavy toll: IDC thinks white-label sales, which it calls ODM Direct, grew 75% Y/Y (up from Q4's 47% clip) and made up 7.3% of industry revenue, up from 6.4% in Q4 and 4.1% a year ago.
    • IDC estimates market leader H-P (HPQ) saw its share hold steady at 26.5%, after having grown (at IBM's expense) 260 bps Y/Y in Q4. #2 IBM, whose hardware sales have been battered, saw its share fall 600 bps Y/Y to 19.1%.
    • #3 Dell's share slipped 20 bps to 18%, while #4 Cisco (CSCO), which just reported a 29% Y/Y April quarter sales jump for its UCS server segment, saw its share rise 170 bps to 5.7%. #5 Oracle (ORCL), whose server sales are finally stabilizing thanks to engineered systems growth, rose 20 bps to 4.9%.
    • Sales of x86 servers, over 90% of which contain Intel (INTC) CPUs, rose 4.9% after growing 7.8% in Q4. Non-x86 server sales tumbled 25.2%, and now make up just 17.9% of industry revenue.
    • Cisco now has an estimated 24.4% of the blade server market, behind only H-P's 43.7%.
  • May. 27, 2014, 9:18 AM
    • Talks at last week's Cisco Live conference with management and IT product buyers/distributors leaves Deutsche confident about a "stronger than anticipated [multi-quarter] ramp for Cisco's new switching, routing, security, wireless, and Cloud IT Services solutions."
    • The products in question include Cisco's (CSCO) Nexus 9000/ACI switching/SDN platform, its CRS-X and NCS core routers, Meraki's Wi-Fi hardware/management software, and SourceFire's security hardware.
    • Deutsche's PT has been upped to $30. A long line of firms hiked their PTs two weeks ago following Cisco's FQ3 beat and better-than-expected FQ4 guidance.
    • Deutsche had downgraded Cisco to Neutral in November (following weak FQ2 guidance), when shares were at ~$21.
  • May. 21, 2014, 10:45 AM
    • Cisco (CSCO +1.1%) is buying ThreatGRID, a developer of malware-protection and threat-intelligence software (both on-premise and cloud-based). Terms are undisclosed.
    • ThreatGrid also provides an on-premise hardware appliance for makware analysis, and multiple analytics tools for studying security threats. Cisco states the company's offerings will strengthen its Advanced Malware Protection portfolio, acquired last year through the Sourcefire deal.
    • SecurityCurrent's Richard Stiennon argues ThreatGrid's sandboxing technology for dealing with malware threats fills "an important gap" in Cisco's product line, given rivals such as Palo Alto Networks, Fortinet, and FireEye already have sandbox solutions.
    • Cisco is counting on M&A and new services to halt recent security share losses to smaller rivals. A new managed threat defense service was launched last month.
    • Yesterday: Chambers predicts "brutal" IT consolidation
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  • May. 20, 2014, 6:56 PM
    • "If you look at the top companies in the industry, most of them will not exist in a meaningful way in 10 years ... You're going to see a brutal, brutal consolidation of the IT industry where out of the top five players, only two or three of us will be meaningful in as quick as five years" states John Chambers at his Cisco Live (CSCO) conference keynote.
    • Chambers notes two fellow IT giants, IBM and H-P, have seen negative revenue growth in a majority of their quarters since 2011; Cisco, of course, has had its own top-line issues as of late. He predicts smaller vendors (e.g. Juniper, F5, Riverbed) will get squeezed between Cisco (naturally) and the white-label OEMs (beloved by Web/cloud firms) he considers company's biggest threat.
    • The remarks come as Cisco shows off new personal videoconferencing systems - the DX70 and DX80 - that go for $1K-$2K apiece, as well as new services and partners for its InterCloud platform, which aims to enable interconnected cloud services from dozens of service provider partners (rather than Cisco itself).
    • Cisco has promised to invest $1B over the next two years in InterCloud, as it tries to make up lost time in a market featuring aggressive pricing and a long list of rivals that include Amazon, Microsoft, and IBM. New partners include NetApp and Accenture.
    • The DX70/80 have won praise for their sleek, minimalist hardware (shades of Apple) and streamlined UI, but critics also scoff at their premium pricing. Videoconferencing weakness led Cisco's collaboration revenue to fall 12% Y/Y in FQ3; orders (boosted by WebEx) grew 4%.
  • May. 15, 2014, 1:04 PM
    • No less than 16 firms have upped their Cisco (CSCO +6.4%) PTs after the company beat depressed FQ4 estimates and offered better-than-expected guidance and order data. The hikes are generally in the $1-$2 range.
    • RBC (Outperform) thinks value investors might embrace Cisco as it returns to flat revenue growth and further cuts opex. "[Free cash flow] is predictable at $11B-$12B/yr; we look for Cisco to remain a dividend grower." After backing out ~$30B in net cash, Cisco currently goes for ~8x RBC's FCF target range.
    • Goldman (Buy) estimates Cisco's routing and switching numbers were respectively 8% and 2% above consensus, and is pleased with early uptake for the Nexus 9000/ACI SDN platform and NCS and CRS-X core routers.
    • Nonetheless, there are still plenty of concerns about long-term challenges. MKM (Neutral), which has already raised alarm bells about SDN threats: "Cisco seems to be benefiting from SDN in the near term, but the competitive landscape is set to become much more difficult over a 12+ month time frame."
    • Credit Suisse (Underperform) questions "the size and scope" of early Nexus 9000 deployments. "Our secular concern is that the impact of SDN will introduce more competition at multiple points in the network. While the impact will take time, the threat will be very real, shrinking gross profit dollars for the entire networking stack."
    • Shares are holding onto yesterday's AH gains in spite of a tech selloff.
    • More on Cisco's earnings
  • May. 15, 2014, 9:15 AM
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  • May. 14, 2014, 6:10 PM
    • Cisco (CSCO) expects FQ4 EPS of $0.51-$0.53 vs. a $0.51 consensus. In spite of posting an FQ3 gross margin of 62.7%, the company is only guiding for an FQ4 GM of 61%-62%.
    • John Chambers once more states Cisco is seeing price pressure in markets such as campus switching (Huawei and H-P are competing aggressively here), but insists SDN (generally seen as a 2015-and-later problem) isn't a factor. Switching, emerging markets, and carrier sales are expected to stay pressured near-term.
    • Though GAAP opex fell 2% Y/Y, non-GAAP opex fell 6% (boosted EPS). Headcount declined by 230 Q/Q to 73.8K.
    • Data center (UCS server) sales remain strong, growing 29% Y/Y (share gains against Dell/H-P/IBM). Likewise, service provider video sales (-26%, set-top share loss to ARRS) remain weak.
    • Wireless sales only rose 3% (possible share loss to the likes of ARUN, UBNT, and HIVE), but orders rose 12%, and Meraki continues seeing strong user growth. Recently-acquired Sourcefire saw orders grow 20%.
    • Cisco says its new ACI/Nexus 9000 SDN/networking virtualization platform (praised for its feature set, but not for its pricing) gained 175 customers, and has a pipeline of 1K+.
    • More on Cisco's earnings
  • May. 14, 2014, 5:38 PM
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  • May. 14, 2014, 4:44 PM
    • Cisco (CSCO) guides on its FQ3 CC for FQ4 revenue to be down 1%-3% Y/Y; that's favorable to a -5.2% consensus.
    • In addition, John Chambers states Cisco's product orders were "relatively flat" Y/Y, a marked improvement from FQ2's 4% drop. Book-to-bill was "comfortably above 1."
    • Strong U.S. (+7% Y/Y) and Northern European (+4%) orders provided a lift. Emerging markets (-7%) and service provider (-5%) orders remain soft.
    • Router revenue fell 10%, but orders were nearly flat. Switch sales fell 6%.
    • FQ3 results, details
  • May. 14, 2014, 4:20 PM
    • Cisco's (CSCO) had an FQ3 gross margin of 62.7%, +140 bps Q/Q and -30 bps Y/Y, and above guidance of 61%-62%. That contributed to the quarter's EPS beat.
    • After falling 11% Y/Y in FQ2, Cisco's product revenue (76% of total revenue) fell 8% in FQ3 (share loss in multiple markets). Services revenue (heavily tied to past product sales) rose 3%, even with FQ2. Opex fell 2% Y/Y after falling 6% in FQ2.
    • $2B was spent on buybacks vs. $4B in FQ2. In spite of the sales weakness, free cash flow rose slightly Y/Y to $2.83B (exceeding net income of $2.6B). The deferred revenue balance is up 4% Y/Y to $13.2B.
    • Cisco now has $50.5B in cash/investments (much of it offshore), and $20.9B in debt.
    • CSCO +4.1% AH. CC at 4:30PM, guidance should be provided.
    • FQ3 results, PR
  • May. 14, 2014, 4:07 PM
    • Cisco (CSCO): FQ3 EPS of $0.51 beats by $0.03.
    • Revenue of $11.54B (-5.6% Y/Y) beats by $160M.
    • Shares +3.7%.
    • Press Release
  • May. 13, 2014, 5:35 PM
  • May. 2, 2014, 1:34 PM
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  • May. 1, 2014, 10:33 AM
    • Cisco (CSCO -0.3%) will integrate Jive's (JIVE +7%) enterprise social networking platform with its widely-used WebEx (Web conferencing) and Jabber (corporate IM and IP voice/video) tools, and resell Jive's offerings both directly and through its partner network.
    • Thomson Reuters is an early adopter of the Cisco/Jive solution: It's 60K employees are able to join/launch WebEx meetings and Jabber chat sessions from Jive's platform.
    • The deal gives Jive, whose shares have slumped amid tough competition from IBM, Salesforce, SAP, and Microsoft's Yammer unit, a needed shot in the arm. Microsoft has been working to integrate Yammer with its Lync unified communications solution (competes against WebEx/Jabber) and SharePoint collaboration platform.
    • Cisco's collaboration revenue fell 7% Y/Y in the January quarter thanks in part to videoconferencing weakness, but WebEx (21% growth) was a strong point. The Jive deal suggests the company might not make its own acquisition in an enterprise social networking space that has seen consolidation.
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Company Description
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.