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Cisco Systems, Inc. (CSCO)

  • Mar. 13, 2014, 4:26 AM
    • Apple (AAPL), Microsoft (MSFT), Google (GOOG) and Cisco Systems (CSCO) hold a combined $124B in U.S. Treasurys and a further $39B in other government debt, the U.K.'s Bureau of Investigative Journalism calculates.
    • The tech giants appear to hold much U.S. debt offshore, which enables them to earn tax-free interest. Repatriating the assets would saddle them with a huge tax bill.
    • Unsurprisingly, Senator Carl Levin is not happy. "If a U.S. multinational puts its offshore cash into a U.S. bank and uses the money to buy U.S. Treasurys, stocks and bonds, those funds ought to be treated as having been repatriated and subject to US tax."
  • Mar. 6, 2014, 6:30 PM
    • Cisco (CSCO) is packaging various software/services offerings found in its ONE software-defined networking (SDN) platform (previous) into four suites that can be individually licensed, and which are meant for different use cases.
    • "We have a bunch of products. We’ll turn those products into licenses – a data center suite, a WAN suite, an access suite – for the enterprise," says sales chief Rob Lloyd.
    • Central to these efforts is Cisco's APIC SDN controller, unveiled last November along with several other products from its Insieme unit, and promising superior app/network visibility relative to alternatives.
    • Cisco's likely goals, in addition to simplifying its pricing: 1) To head off a slew of SDN rivals - none larger than VMware/Nicira - hoping to sell enterprises on programmable networks capable of running on commodity (read: non-Cisco) gear. 3) To further drive a mix shift towards software at a time when hardware margins are seeing a bit of pressure.
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  • Feb. 27, 2014, 7:07 PM
    • With enterprise server sales under pressure and the cheap white-label servers used by the Googles and Amazons of the world gaining more ground, IDC estimates global server revenue fell 4.4% Y/Y in Q4, a decline steeper than Q3's 3.7%. Gartner estimates revenue fell 4.5%.
    • IDC thinks market leader H-P (HPQ), which posted relatively healthy enterprise hardware numbers for its January quarter, saw its share rise 260 bps Y/Y to 26.9%. #2 IBM, whose hardware ops had a brutal Q4, saw its share drop 910 bps to 26.8% in what's typically a seasonally strong quarter for the company.
    • #3 Dell is assigned a 14.5% share (+30 bps). #4 Cisco (CSCO), whose UCS server unit remains a bright spot, is given a 4.5% share (+130 bps). Following many quarters of share losses, engineered systems growth allowed #5 Oracle's (ORCL) share rose 10 bps to 4.1%.
    • White-label server sales, referred to by IDC as ODM Direct, soared 47% Y/Y, and now make up 6.4% of industry revenue. "Density-optimized" server sales, which include white-label gear and OEM offerings, soared 70%. H-P has a 34.9% share.
    • A positive for Intel (INTC): x86 server sales rose 7.8%, up from Q3's 2.8% clip. A positive for Red Hat (RHT): Linux server sales rose 14.4% vs. 5.6% in Q3, and now make up 28.5% of industry revenue. Windows server sales (45.7% of revenue) were nearly flat, Unix sales (13.6% of revenue) fell 20.2%.
  • Feb. 25, 2014, 2:14 AM
    • Cisco Systems (CSCO) has raised $8B in the largest corporate-bond sale so far this year and the biggest for investment-grade notes since Verizon sold $49B worth of debt in September.
    • Cisco plans to use the money to finance stock buybacks and dividends, and to repay $3.75B of notes that mature this year.
    • Cisco sold debt in seven parts with fixed- and floating-rate securities, with yields ranging from 1.1% to 3.625%.
    • Moody's rates Cisco at A1 and S&P at AA-.
    • While Cisco "hasn't had smooth sailing from the equity perspective," says money manager Thomas Chow, "there's overwhelming demand...for well-known issuers with strong fundamentals." Cisco "has a large cash balance and a dominant position in product lines that aren’t going to disappear overnight," Chow adds. (PR)
  • Feb. 24, 2014, 2:11 PM
    • Cisco (CSCO -0.1%) has filed a shelf registration for a debt offering whose proceeds the company plans to use to pay down $3.75B in debt maturing this year, and to finance its dividend (recently hiked) and buyback program (expanded by $15B in November).
    • Reuters reports Cisco is raising at least $7B. The networking giant is said to be offering floating rate notes with three maturities (18-month, 3-year, and 5-year), and fixed-rate notes with four maturities (3-year, 5-year-, 7-year, and 10-year). Informa's Ken Jacques states $17B worth of orders have been placed.
    • With demand for blue-chip corporate debt remaining strong, interest rates are bound to be low. Reuters states Cisco's 3-year fixed notes is set to carry only a 45bps premium to comparable Treasurys, and its 10-year fixed notes only a 105 bps premium.
    • Cisco had $47.1B in cash/investments as of Jan. 25 (much of it offshore), and $17.1B in debt.
  • Feb. 13, 2014, 11:28 AM
    • With a fair amount of bad news priced in, Cisco (CSCO -4.3%) hasn't caught any downgrades after providing soft order data to go with an FQ2 beat, dividend hike, and in-line guidance, and has only seen one PT change - MKM has cut its target to $20 from $24.
    • Some analysts are a little worried about Cisco's margins. Though FQ2's gross margin (61.3%) was in-line with a 61%-62% guidance range, Goldman states it was below a 61.9% consensus. The firm also points out product GM (hurt by declining sales) fell 210 bps Y/Y.
    • CFO Frank Calderoni mentioned on the CC (transcript) FQ2 price pressure was at the high end of Cisco's historical range. Goldman sees margins rebounding in 2H14 as volumes recover, but is also keeping an eye on whether "discounting pressure mounts as large cloud customers become a larger percentage of the mix."
    • John Chambers defends his company in part by asserting Cisco's enterprise deal pipeline is up over 20%, and its pipeline of $1M+ enterprise deals is up 30%. A pickup in signings of "architectural" deals covering a diverse array of products is said to be responsible.
    • Cisco's enterprise orders fell 2% Y/Y in FQ2, a more moderate drop than the 12% decline seen in carrier orders.
    • More on Cisco's earnings
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  • Feb. 12, 2014, 5:29 PM
    • Cisco (CSCO) guides on its CC for FQ3 EPS of $0.47-$0.49, in-line with a $0.46 consensus. The company also reiterates FY14 EPS guidance of $1.95-$2.05 (consensus is at $1.98).
    • However, the networking giant adds its orders fell 4% Y/Y for the second quarter in a row. The main culprits: Switch orders fell 6%, router orders 5%, and (thanks to plunging set-top sales) service provider video orders 20%.
    • Switch sales (39% of product revenue) fell 12% Y/Y in FQ2, and router sales (21% of product revenue) fell 11%. SP video fell 22%, and collaboration (videoconferencing, WebEx) 7%; the latter could be a negative for Polycom (PLCM).
    • Data center (UCS server) revenue only rose 10% after growing 44% in FQ1. However, Cisco asserts orders growth was in the mid-30s range. Wireless (dominated by Wi-Fi), another growth area in recent quarters, fell 4%. Aruba (ARUN) -2% AH in response.
    • Americas orders -5%, EMEA -2%, Asia-Pac -5%. Enterprise -2%, SMBs and public sector +1% each.
    • CSCO now -3.8% AH.
    • More on Cisco
  • Feb. 12, 2014, 4:44 PM
    • Cisco (CSCO) doesn't waste time on its CC to announce it's guiding for FQ3 revenue to drop 6%-8% Y/Y, in-line with a 7.1% consensus.
    • John Chambers mentions emerging markets orders only fell 3% Y/Y in FQ2, after dropping 12% in FQ1. However, service provider orders fell 12% after falling 13% in FQ2; that figure likely suggests additional share loss.
    • Shares have sold off in response to the remarks.
    • FQ2 results, details/dividend hike
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  • Feb. 12, 2014, 4:29 PM
    • Cisco (CSCO) uses its FQ2 report to announce a $0.02/share increase in its quarterly dividend to $0.19/share. Shares now sport a 3.3% yield.
    • Cisco, which added $15B to its buyback three months ago, also says it bought back $4B worth of shares (over 3% of outstanding shares) in FQ2 at an average price of $21.73. $2B was spent on buybacks in FQ1, and $1.2B in FQ4.
    • Product revenue (drives future services revenue) fell 11% Y/Y to $8.4B Services revenue rose 3% to $2.7B and contributed to the revenue beat.
    • Gross margin was 61.3%, -100 bps but in-line with guidance of 61%-62%. Job cuts led opex to fall 6% Y/Y to $4.28B.
    • CSCO -0.4% AH. CC at 4:30PM ET, guidance should be provided.
    • FQ2 results, PR
  • Feb. 12, 2014, 4:06 PM
    • Cisco Systems, Inc. (CSCO): FQ2 EPS of $0.47 beats by $0.01.
    • Revenue of $11.2B (-7.4% Y/Y) beats by $170M.
    • Press Release
  • Feb. 12, 2014, 12:45 PM
    • With shares having badly underperformed the Nasdaq since August due to earnings disappointments (I, II), expectations for Cisco (CSCO +0.4%) are fairly low going into today's FQ2 report. Thanks to emerging markets, set-top, and carrier router weakness, analysts collectively forecast Cisco will see an 8.8% Y/Y revenue drop in FQ2, and a 7.1% drop in FQ3.
    • Stifel's checks indicate Juniper (JNPR - Q4 service provider sales +12% Y/Y) is taking carrier router share from Cisco. The firm is also worried many Cisco customers are holding off on data center switch purchases as they evaluate its new Insieme/ACI SDN platform.
    • Insieme has received a mixed early reception, with some praising its innovative (software-driven) feature set and others deeming too costly/complex relative to SDN/networking virtualization alternatives that can leverage commodity hardware. VMware's (VMW) NSX platform is arguably its biggest rival on this front.
    • Though admitting Cisco faces a slew of near-term challenges, Cantor remains upbeat about the potential of new products, including Insieme/ACI and Cisco's NCS carrier routers, to provide a lift in FY15 (ends July '15).
    • UBS, while reiterating a Buy, thinks a long-term battle for data center supremacy is getting underway between Cisco and VMware, one whose outcome is far from certain.
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  • Feb. 12, 2014, 12:10 AM
  • Feb. 11, 2014, 5:35 PM
  • Feb. 4, 2014, 9:31 AM
    • Less than two weeks after announcing a patent cross-licensing deal with Samsung, Google (GOOG) says it has reached one with Cisco (CSCO). Terms are undisclosed. (PR)
    • Both Google and Cisco have directly and indirectly targeted in a number of high-profile IP suits, and each has argued in favor of patent law reform aimed at reducing the number of suits filed by patent trolls. In their PR, the companies at least give the impression their cross-licensing deal is focused on avoiding litigation rather than monetizing IP.
    • Google is fresh off reaching a deal to sell Motorola Mobility to Lenovo, a move that reduces (but doesn't eliminate) its hardware-related patent exposure. Google is holding onto the "vast majority" of Motorola's patents.
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  • Jan. 27, 2014, 2:57 PM
    • A month after announcing it will invest up to $4B in Ontario over the next ten years, Cisco (CSCO -0.7%) says it will directly and indirectly invest up to $1.35B in Mexico.
    • The spending will be tied in large part to the expansion of product sourcing in Mexico via contract manufacturers, and the development of a local support center. Though Cisco only has 600 employees in Mexico, manufacturing partners have over 5,800 dedicated to making Cisco hardware.
    • Back in August, Cisco announced it's cutting 4K jobs (5.5% of its workforce) globally.
    • Meanwhile, JPMorgan's Rod Hall, who has downgraded shares to Underweight, says he's worried about emerging markets weakness, along with delays in switch purchases caused by the adoption of software-defined networking (SDN).
    • Cisco saw a 12% Y/Y drop in emerging markets orders in its Oct. quarter (thanks in part to NSA-fueled China weakness), and John Chambers stated last month emerging markets remain "extremely challenged," even as the U.S. shows signs of improvement.
    • SDN growth is viewed as a long-term threat to Cisco, but major enterprise uptake isn't expected before 2015, and major carrier uptake could take longer still.
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  • Jan. 27, 2014, 9:45 AM
    • Cisco (CSCO -0.9%) has been cut to Underweight by JPMorgan ahead of its Feb. 12 FQ2 report.
    • MercadoLibre (MELI -1.7%) has been cut to Underperform by BofA/Merrill. Shares tumbled last week, partly on account of Venezuelan/Argentine forex swings.
    • Xerox (XRX -1.5%) has been cut to Market Perform by BMO after missing Q4 revenue estimates on Friday.
    • Cavium (CAVM +1.6%) has been upgraded to Outperform by Wedbush ahead of Wednesday's Q4 report.
    • Xoom (XOOM +8%) has been upgraded all the way to Strong Buy from Market Perform by Raymond James. Q4 results are due on Feb. 4.
    • RetailMeNot (SALE +3.2%) has been upgraded to Buy by Goldman. Q4 results arrive on Feb. 6.
    • SMI (SMI +9.4%) has received a two-notch upgrade to Buy by UBS.
    • IDT (IDTI -4.1%) has been cut to Underweight by Barclays.
    • Nintendo (NTDOY) has been cut to Sell by Goldman. Shares fell 2.2% in Tokyo.
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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.