Fri, Sep. 11, 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."
Thu, Aug. 13, 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
Thu, Aug. 13, 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."
Thu, Jul. 23, 7:33 PM
- Juniper (NYSE:JNPR) has made fresh 52-week highs after beating Q2 estimates with the help of a slight Y/Y increase in Service Provider revenue (contrasts with an 8% Q1 drop). In addition, Q3 guidance is for revenue of $1.23B (+/- $20M) and EPS of $0.50-$0.54, above a consensus of $1.16B and $0.46.
- Business line/segment performance: Routing revenue -3% to $602.4M; switching -5% to $190.2M; security -4% to $107.1M. Service provider revenue up fractionally to $835.3M; enterprise -3% to $386.9M.
- Financials: $600M was spent on buybacks, and another $500M has been added to Juniper's authorization, bringing its size back up to $675M. Thanks to job cuts, R&D, sales/marketing, and G&A spend respectively fell by $3.9M, $25.6M, and $4.3M Y/Y to $251.6M, $232.4M, and $56.3M. Juniper ended Q2 with $3.08B in cash/investments, and $1.95B in debt.
- Archrival Cisco (NASDAQ:CSCO) is following Juniper higher AH. Cisco rose 1.7% in regular trading after announcing it's selling its set-top unit (has been seeing major sales declines/share loss) to Technicolor for $600M. The company remains a major provider of infrastructure hardware and software - for example, the cloud-based Videoscape platform - to pay-TV providers.
- Juniper's Q2 results, PR
Thu, Jul. 23, 8:37 AM
- France's Technicolor (OTCQX:TCLRY) is buying the set-top box and cable modem business from Cisco Systems (NASDAQ:CSCO) for €550M (about $600M) in cash and stock, after many Cisco investors called for the company to get out of set-tops entirely despite billions invested.
- About $450M of the deal is in cash and $150M in stock. The deal is expected to close in Q4 or the first quarter of next year, after regulator OKs.
- Set-tops have been in decline, making for a drag on Cisco's video business. Google offloaded its own Motorola Home business to Arris Group for more than $2B last year.
- Premarket: CSCO +1%.
Wed, Jun. 24, 11:54 AM
- Baird has downgraded Fortinet in response to a healthy 2015 run-up, and many security tech peers have joined the company in seeing profit-taking (HACK -1.3%). The Nasdaq is down just 0.1%.
- Decliners include FireEye (FEYE -2.3%), Qualys (QLYS -6.7%), KEYW (KEYW -5.1%), Check Point (CHKP -1.9%), Barracuda (CUDA -2.5%), Vasco (VDSI -2.5%), and Proofpoint (PFPT -1.8%). UBS downgraded FireEye to Neutral two days ago while citing valuation, and also cut Symantec to Sell. RBC has hiked its Qualys target by $6 to $44 today, while reiterating a Sector Perform.
- The selloff comes as an Office of Personnel Management (OPM) official states up to 18M Social Security numbers may have been stolen in a recent breach. FireEye recently ID'd a Chinese group it believes was responsible for the hack.
- Meanwhile, the WSJ has published a column about Check Point's efforts to expand beyond its core firewall market, and thereby keep the likes of Fortinet and Palo Alto Networks at bay. Gartner estimates Check Point had a 22.7% 2014 firewall share, well above #2 Cisco's (NASDAQ:CSCO) 15.9% but down from a 2013 share of 24%.
Tue, Jun. 23, 8:25 AM
- In tandem with its FQ1 report, BlackBerry (NASDAQ:BBRY) has announced a patent cross-licensing deal with Cisco (NASDAQ:CSCO) that will result in BlackBerry getting a license fee; other terms are confidential. The company has also announced pharma industry exec Laurie Smaldone will replace Procter & Gamble vet Claudia Kotchka on the board.
- Segment performance: Though FQ1 revenue missed estimates, software/tech licensing revenue (closely watched) was strong, rising 150% Y/Y to $137M and totaling 21% of revenue vs. 10% in FQ4. Services (hurt by fee cuts) fell to 38% of revenue from FQ4's 47%, and hardware to 40% from 42%.
- Revenue was recognized on 1.1M phone sales, down from 1.3M in FQ4 and 1.6M a year ago; ASP rose $29 Q/Q to $240. 2,600 enterprise customer wins were recorded; 45% of software licenses for the deals were cross-platform.
- Geographic performance: Thanks to the software growth, North American revenue rose 3% Y/Y to $285M. EMEA revenue fell 41% to $245M, Latin America 66% to $42M, and Asia-Pac 43% to $86M.
- Financials: Cost cuts remain aggressive: R&D spend fell 41% Y/Y to $139M, and SG&A 56% to $174M. GAAP Gross margin was 47.1% vs. 48.2% in FQ4 and 46.7% a year ago; non-GAAP GM was 50.3%. The cash balance rose by $50M Q/Q to $3.32B; debt stands at $1.25B.
- Free cash flow was $123M. BlackBerry "continues to target sustainable non-GAAP profitability some time in fiscal 2016."
- Shares have risen to $9.70 premarket. They had sold off in the weeks going into earnings.
- FQ1 results, PR
Tue, Jun. 9, 1:42 PM
- Summit Research's Srini Nandury thinks Nimble Storage's (NYSE:NMBL) recent rally has been fueled by M&A hopes ... and considers them justified. He believes Cisco (NASDAQ:CSCO), EMC, and NetApp (NASDAQ:NTAP) could be among the larger OEMs willing to bid for the hybrid storage array upstart.
- Nandury: "Given that Nimble is one of the best Hybrid storage assets in the market, any buyout offer for Nimble will likely trigger a bidding war as we had seen previously with both Data Domain and 3Par. And, given that Nimble is executing solidly in both SMB and enterprise storage environments, and is expected to roll out both NAS and Object storage in the near-term (12-18 months) and will most likely get acquired, we reiterate our BUY rating on the stock and maintain our $40 PT."
- EMC has bought flash array vendors XtremIO and DSSD; Cisco has bought flash vendor Whiptail; and hard drive giants Seagate and Western Digital have also used M&A to expand their flash offerings. NetApp has relied more on internal R&D to flesh out its product line, but the company's recent top-line woes and CEO change have fueled speculation it could turn to M&A.
- Of note: With a market cap of $2.2B (a deal premium could bring it near $3B), Nimble would be digestible for larger industry players, but not cheap.
Wed, May 13, 5:33 PM
- During Cisco's (NASDAQ:CSCO) FQ3 earnings call, John Chambers said he "would not bet" on a security M&A rumor heard today.
- That was an apparent reference to FireEye (NASDAQ:FEYE), whose shares jumped on unconfirmed rumors that Cisco had made a bid.
- FireEye has fallen to $41.71 in AH trading following Chambers' remarks. Shares are still up $0.41 from Monday's close.
Wed, May 13, 9:26 AM
- EZchip (NASDAQ:EZCH) uses its Q1 report to state its largest customer (i.e. Cisco) doesn't currently plan to use EZchip's NPS-400 network processor (NPU) in its next-gen edge router line cards.
- The company adds Cisco (NASDAQ:CSCO) recently began using EZchip's NP-5 NPU (entered production in late 2014), that it doesn't think "a next generation successor for the NP-5 is likely to ship for approximately three years," and that the NP-5 is expected to "continue generating revenues at this customer for several more years beyond this three year period."
- Concerns that Cisco could drop EZchip in favor of an in-house NPU have been around since the networking giant unveiled its nPower X1 NPU in Sep. 2013. At the time, EZchip said it believes Cisco hasn't made a decision on which processor will succeed the NP-5.
- Today, EZchip says it believes Cisco's next-gen edge router line cards will require more throughput than is provided by the NPS-400 (480 Gbps), and that Cisco is "currently developing such a solution in-house." EZchip, for its part, is working on an NPS-400 successor (the 1Tbps NPS-1000) that it hopes to sell Cisco on. The NPS-400 begins sampling in 2H15, and is being considered for other platforms at Cisco (as well as other clients).
- EZchip has tumbled to $14.28 in premarket trading.
- Q1 results, PR
Thu, Mar. 26, 2:05 PM
- MKM's Michael Genovese is pleased with Infinera's (NASDAQ:INFN) recent unveiling of two new photonic integrated circuits (PICs) that will go into optical transport systems aimed at 100G metro networks. "PICs are the source of the company's competitive advantage in long haul, and we expect the new more flexible and granular PICs to form the basis of a compelling Metro 100G aggregation/Telecom product later this year."
- Infinera asserts its new PICs offer more flexibility by allowing capacity to be "divided at a granular optical level with each slice capable of being routed in a different direction as it exits the line card or the system housing it." One PIC (the ePIC-500) delivers 500Gbps of capacity at network hub locations, and the other (the oPIC-100) 100Gbps at network spoke locations.
- Infinera claims tests showed "an estimated average reduction of 28 percent in modules, 31 percent in power and 45 percent in bandwidth inefficiencies as compared to conventional, commercial off the shelf technologies that deliver single-wavelength or super-channel solutions for 100G, 200G or 400G."
- Genovese sees Infinera's addressable market expanding to ~$20B in 2018 from ~$5B in 2014 as it "competes in end-to-end Optical Transport including Metro and [data center infrastructure]," and as its systems handle traffic forwarding features traditionally handled by routers - the latter could pose challenges for Cisco (NASDAQ:CSCO) and Juniper (NYSE:JNPR).
- Infinera is once more within a dollar of a 52-week high of $19.48.
Tue, Mar. 24, 11:29 AM
- Like others, Stifel reports Ciena (NYSE:CIEN) and Cisco (NASDAQ:CSCO) are expected to share a huge Verizon 100G metro optical contract. However, while others have reported Cisco will get ~2/3 of the contract, Stifel's checks indicate the Cisco/Ciena split hasn't been determined; the firm believes "both vendors will start on an equal footing," and that Ciena might even get a majority of the deal.
- Ciena is expected to supply a platform that's similar to its 6500 series packet-optical (integrated Ethernet switching/optical networking) hardware, and which supports OTN switching. Stifel thinks Ciena, whose 6500 series is already used in Verizon's 100G long-haul network, could get over $100M in 2016 revenue from the metro deal. Cowen has estimated the total contract opportunity could be worth $200M-$300M over two years.
- Optical component vendor NeoPhotonics (NPTN +4%), which received 15% of its 2014 revenue from Ciena (trailing only Huawei's 38%) and has healthy 100G exposure, is also rallying. Its shares are now up 104% since a Q4 beat was posted on March 3.
- Update: Verizon has confirmed Ciena and Cisco have won the deal. No word on the split between the companies.
Thu, Mar. 5, 11:31 AM
- Zix (ZIXI +7.2%) and Cisco (CSCO - unchanged) have struck an OEM deal regarding the integration of Zix's e-mail encryption tech with a new version of Cisco's IronPort Encryption Appliance (IEA), and the inclusion of Cisco's Post X Envelope e-mail delivery method with the ZixGateway e-mail encryption appliance.
- The IEA refresh will become available in May, and the revamped ZixGateway solution in Q4. The former will include new hardware and software patches to go with Zix's technology.
- Zix has surged to new 2015 highs following the announcement. The 52-week high is $4.69.
Mon, Mar. 2, 4:12 PM
- Cisco (NASDAQ:CSCO) rose 2.2% today, and in doing so rallied above $30 for the first time since 2007. Shares are up 12% since the networking giant beat FQ2 estimates and reported 5% Y/Y product order growth on Feb. 11.
- Like telecom equipment peers, Cisco has made a flurry of announcements at the Mobile World Congress. Drawing attention: The launch of the USC 8000 small cell 4G/Wi-Fi base station line for enterprises and public venues. Vodafone is deploying the solution, which includes both access points and controllers and aims to address growing carrier interest in deploying small cells in high-traffic locales.
- Cisco has also announced: 1) Mobility IQ, a SaaS/cloud-based analytics software solution for mobile carriers that contains network monitoring, advertising, and service management tools; IBM has also shown an interest in this space. 2) A deal with AT&T through which Ma Bell will rely on Cisco's products to deliver connected car services.
Wed, Feb. 25, 3:16 PM
- Bloomberg reports HP (HPQ -10.1%) is in talks to acquire enterprise Wi-Fi hardware/software provider Aruba Networks (ARUN +22.5%), and that a deal could be announced as soon as next week. Aruba has skyrocketed on the report, and has taken rival Ruckus (RKUS +4.7%) higher with it. Aruba's market cap is now around $2.5B.
- Aruba is the enterprise Wi-Fi market's #2 player - behind Cisco (NASDAQ:CSCO), which towers over the space - and HP is also in the top-5. IDC estimates Cisco, Aruba, Ruckus, and HP respectively had Q2 2014 enterprise Wi-Fi shares of 46.8%, 11.8%, 6.2%, and 4.5%.
- HP, whose shares have plunged today due to an FQ1 revenue miss and soft guidance, saw its total networking revenue drop 11% Y/Y in FQ1 - "execution issues" in the U.S. and China were blamed. The IT giant has suggested it's open to making enterprise acquisitions ahead of its PC/printing spinoff.
Thu, Feb. 12, 2:00 PM
- At least six firms have upped their Cisco (CSCO +8.7%) targets in response to the company's FQ2 beat, in-line guidance, and healthy product orders. Shares are at their highest levels since 2007.
- "We came away from the call with greater confidence in Cisco's technology leadership, execution and recovery trajectory," writes Oppenheimer (Buy). "While the headwinds in emerging markets and service provider are likely to remain in place, we believe that by now they are well reflected in estimates."
- William Blair (Outperform): "While Cisco clearly benefited from easy comparisons across its business and several major product cycles, we nonetheless walked away with increased confidence in the company's business momentum, growth prospects and strategic positioning."
- Sterne Agee (Buy): "The biggest takeaway that should drive incremental support in the stock near term is the improving tone on emerging markets (India plus 11%, Mexico plus 21%) along with U.S. commercial strength up 12% against a relatively tough comp (total Americas up 7% along with EMEA up 7%)."
- Deutsche (Buy) believes Cisco businesses responsible for half of sales - data center switching, security, services, and Wi-Fi - can post growth "2x or higher" than GDP growth. Credit Suisse (Underperform) remains bearish on a belief SDN will begin having a bigger impact on Cisco's sales and margins over the next 12-18 months.
- John Chambers mentioned yesterday Cisco now has 300+ customers for its APIC SDN controller. The remarks come after VMware reported paid customer count for its rival NSX platform rose 60% Q/Q in Q4 to 400+. Facebook, meanwhile, has just revealed a new modular switch platform for its open-source Open Compute Project.
- Prior Cisco earnings coverage
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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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