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Friday, Dec 132:04 PMCisco to invest up to $4B in Ontario; shares add to losses
Friday, Dec 132:04 PM| Comment!
- Just four months after Cisco (CSCO -1%) announced it's cutting 4K jobs, the networking giant says it plans to invest up to $4B over the next ten years in Ontario. (PR)
- Cisco will add up to 1.7K jobs in the Canadian province over the next six years, with "a focus on R&D," and could grow its Ontario headcount by up to 5K by 2024.
- Shares are adding to yesterday's losses, as investors continue to mull the growth forecast cut and downbeat emerging markets commentary provided at Cisco's analyst meeting. Today's drop comes even though a number of analysts are defending the company.
- Raymond James (Outperform) is upbeat about Cisco's efforts to create products that enable more software-centric networks, and likes its low valuation (7x EPS exc. cash).
- Also: Cisco stated at its meeting (transcript) it won't abandon its struggling set-top business, in spite of growing calls to do so. The company argues keeping the business is crucial to maintaining its ties with pay-TV providers.
- Cisco also declared its pipeline of $1M+ U.S. enterprise deals is improving, and suggests the business is bottoming the same way its commercial (SMB) ops did a few quarters ago.
Thursday, Dec 1211:51 AMCisco lowers growth outlook, peers/suppliers fall in sympathy
Thursday, Dec 1211:51 AM| 2 Comments
- Cisco (CSCO -2.3%) is now targeting annual revenue growth of 3%-6% over the next 3-5 years, down from a prior 5%-7%, says CFO Frank Calderoni states at the networking giant's analyst meeting. In addition, Calderoni says Cisco's FY14 (ends July '14) revenue growth outlook is "basically" in-line with a Street forecast for a 4% decline.
- Cisco is now aiming for services revenue growth of 7%-10% over the next 3-5 years, down from 9%-11%; services accounted for 22% of Cisco's Oct. quarter revenue. Businesses related to "enabling the cloud" (a somewhat nebulous term) are expected to show a 12%-18% growth rate.
- Cisco, already pressured by John Chambers' macro comments, continues to trade lower. Many networking equipment peers and component/chip suppliers are also selling off; in addition to Cisco, Ciena's mixed FQ4 results and slightly soft FQ1 guidance could be playing a role here.
- Notable networking equipment/component/chip decliners: JNPR -3.1%. BRCM -2.5%. PKT -2.8%. FFIV -2.2%. ERIC -2.1%. JDSU -1.9% (getting pulled from the S&P 500). AFOP -5.5%. CAVM -1.7%. AMCC -1.8%. BRCD -1.8%. MRVL -1.6%. ARUN -1.7%. CALX -1.7%.
Thursday, Dec 1210:20 AMCisco falls as Chambers talks of emerging markets challenges
Thursday, Dec 1210:20 AM| 3 Comments
- Though U.S. demand is starting to show signs of improvement, emerging markets remain "extremely challenged," says John Chambers at Cisco's (CSCO -2.4%) annual analyst meeting. Those comments are helping Cisco add to the losses they saw yesterday following a Citi downgrade.
- Cisco reported a 12% Y/Y drop in emerging market orders for its Oct. quarter, and 18% order drops for both China and India. John Chambers admitted at the time the NSA scandal has affected Cisco's Chinese sales, but insisted it's not a major issue elsewhere.
- Yesterday, an IBM exec provided a somewhat different macro take than Chambers, asserting the European macro climate is improving but adding North America remains "a little more uncertain."
- Chambers also issued cautious macro commentary in September.
- Meeting webcast. Presentations: I, II
Wednesday, Dec 116:57 PMCisco roundup: Citi downgrade, set-tops, UCS servers
Wednesday, Dec 116:57 PM| Comment!
- Citi's Ehud Gelblum, who just started coverage on Cisco (CSCO) with a Sell, says he's concerned about core routing competition from Alcatel-Lucent, as well as potential data center switching share loss as companies embrace non-proprietary solutions.
- Tough core/edge routing competition from Alcatel and Juniper likely contributed to 13% Y/Y service provider order drop Cisco reported last month. But the company has been maintaining its dominant position in data center switching. IDC thinks Cisco had a 62.3% share of the Ethernet switch market in Q3, and a 65.9% share in the growing 10-gig segment.
- Cisco is counting on its new Insieme platform - praised for its performance and rich feature set, criticized for its proprietary nature - to head off competition from software-defined networking platforms that enable the use of the "open" hardware Gelblum is concerned about.
- Reuters notes Cisco is facing growing pressure to unload its set-top unit, which saw a 20% Y/Y sales drop in the Oct. quarter. Cisco partly blames the drop on an IBM-like decision to shun low-margin deals, and says a stronger focus on cloud-based pay-TV video solutions will help right the ship.
- Cisco is set to roll out next-gen UCS servers that will be optimized for analytics applications and carrier cloud services, among other things.
- The UCS line, differentiated by its built-in networking gear and strong virtualization performance, has been a bright spot for Cisco. UCS sales rose 44% Y/Y in the Oct. quarter, and IDC estimates Cisco's server share is up to 5%.
Wednesday, Dec 115:09 AMCisco fails in challenge to Microsoft-Skype deal
Wednesday, Dec 115:09 AM| 1 Comment
- The European Union's General Court, the bloc's second highest court - has rebuffed a request by Cisco (CSCO) to revisit the EU's approval of Microsoft's $8.5B acquisition of Skype in 2011.
- Cisco argued that the deal led to a monopoly and that the EU should have demanded concessions from Microsoft.
- However, the judges disagreed. "The merger does not restrict competition either on the consumer video communications market or on the business video communications market," the judges said.
- Cisco can now appeal to the EU Court of Justice.
Tuesday, Dec 104:37 PMCiti upgrades Qualcomm, downgrades BlackBerry, starts Cisco at Sell
Tuesday, Dec 104:37 PM| 13 Comments
- Following the close, Citi has upgraded Qualcomm (QCOM) to Buy, downgraded BlackBerry (BBRY) to Sell, and (as part of a sector launch for networking equipment names) started coverage on Cisco (CSCO) and Brocade (BRCD) at Sell.
- QCOM +0.4% AH. BBRY -1.3% after rallying 3.8% in volatile regular-session trading. CSCO -0.6%. BRCD -0.8%.
Saturday, Dec 78:25 AMMerrill Lynch unveils its top 10 stocks to buy for 2014
Saturday, Dec 78:25 AM| 35 Comments
- BofA Merrill Lynch is a more cautious buyer of stocks after this year's gains, and its top 10 large-cap stocks to buy for 2014 are mostly under-owned and unloved on Wall Street: ADM, Caterpillar (CAT), CenturyLink (CTL), Citigroup (C), Cisco (CSCO), DaVita (DVA), Exxon (XOM), GM, NextEra Energy (NEE) and Nucor (NUE).
- On CAT, the Lynch analysts point to high foreign sales prospects for 2014, and see strength in energy-related profits offsetting weakness in global mining; the firm has a $100 price target vs. ~$90 consensus.
- XOM is considered inexpensive compared to many large-cap energy names, it is expected to continue its large share buyback program and should increase the dividend; Lynch's target is $110 vs. $96 consensus.
- NUE is the ultimate contrarian play, as Wall Street is underwhelmed by steel stocks, but Lynch sees a rebound in commercial building as a big boost for 2014 earnings; the firm has a $60 target vs. $55 consensus.
Friday, Dec 66:41 PMServer sales drop again in Q3, H-P takes share from IBM
Friday, Dec 66:41 PM| 2 Comments
- IDC estimates server sales fell 3.7% Y/Y in Q3. That's a modest improvement from Q2's estimated 6.2% drop, but hardly a figure that will bring cheer to industry players. Gartner estimates revenue fell 2.1% in Q3 vs. 3.8% in Q2.
- The embrace by Web/cloud giants of home-grown servers produced by Asian contract manufacturers (ODMs) continues to upend the industry. IDC thinks sales of such servers rose 45% Y/Y, and now make up 6.5% of industry revenue. It estimates nearly 4/5 of these sales came from the U.S., largely from Google, Facebook, Amazon, and Rackspace.
- #1 H-P (HPQ), which recently reported encouraing enterprise hardware numbers, is assigned a 28.1% share (+150 bps Y/Y) by IDC. #2 IBM, whose total Q3 hardware sales fell 17% Y/Y, is given a 23.4% share (-430 bps).
- Newly-private Dell had a 16.2% share (-40 bps, a reversal from recent gains), Cisco (CSCO - still seeing strong UCS server demand) a 5% share (+170 bps), and Oracle (ORCL - hurt by SPARC/UNIX server weakness) a 4.1% share (-60 bps).
- In a positive for Intel (INTC), x86 servers took share once again, with sales rising 2.8% and making up 79% of industry revenue. Red Hat (RHT) is likely pleased to see Linux servers now make up 28% of industry revenue. Windows (MSFT) servers made up 50%, and UNIX servers just 11%.
- H-P is the leader in the x86 server market (32.3% share), as well as in the growing blade server (43.6%) and density-optimized server (30.7%) markets. There's a decent amount of overlap between the x86 and blade/density-optimized markets.
Friday, Nov 154:41 AMTech giants feel impact of U.S. spying scandal
Friday, Nov 154:41 AM| 5 Comments
- Cisco's (CSCO) FQ1 results earlier this week highlight how major tech firms are feeling the impact of a backlash in China to Edward Snowden's revelations about U.S. spying.
- "All the big U.S. IT companies are concerned," says Jim Lewis, a China and technology expert at the Center for Strategic Studies in Washington.
- Cisco has been the most explicit about attributing the Snowden effect to its falling sales in China; Beijing could be specifically targeting the company due to American hostility to telecom-equipment makers Huawei Technologies and ZTE (ZTCOY) over fears that their products could be used for espionage.
- However, Juniper's (JNPR) experience is that the "The Snowden effect is not real," adding that business in China continues to grow.
- Other companies to suffer in the country recently include IBM (IBM) and Microsoft (MSFT), with the reasons cited including macro-economic factors. IBM might be somewhat inured to the NSA affair, as some of its high-end products face less competition than Cisco's offerings.
Thursday, Nov 148:21 AMCisco hit with three downgrades; analysts eye company-specific issues
Thursday, Nov 148:21 AM| Comment!
- Deutsche and Wedbush have respectively cut Cisco (CSCO) to Hold and Neutral, and Goldman has pulled the networking giant from its Conviction Buy list.
- Deutsche: "While our checks noted emerging markets weakness, we were clearly wrong on magnitude of the order weakness." The firm thinks Asian/emerging markets weakness, also seen in reports from IBM, Alcatel-Lucent, and others, could take "several quarters to improve."
- Wedbush argues Cisco's issues aren't entirely macro-related. "We believe the challenges Cisco faces with [carrier] product transitions raise concerns about the company's ability to manage one of the more evolutionary changes in networking with the new [Insieme] SDN switching platform."
- Goldman, a long-time Cisco bull, thinks only 1/3 of the company's revenue guidance shortfall was due to macro issues. It chalks up the rest to company-specific issues such as product transitions, low-end edge routing share losses to Alcatel and Juniper, and major set-top declines. The firm has lowered its estimates through FY16.
- Shares -11.7% premarket
- More on Cisco, CC transcript
Wednesday, Nov 138:34 PMCisco's guidance, orders spark AH selloff in enterprise/telecom tech names
Wednesday, Nov 138:34 PM| 5 Comments
- Cisco's (CSCO) dispiriting Jan. quarter guidance and Oct. quarter order data has produced an AH selloff in enterprise IT and telecom equipment names, as well as a couple of the companies supplying them. NetApp's below-consensus guidance might not be helping either.
- HPQ -2.1% AH. IBM -1.1%. ALU -2%. FFIV -1.9%. CIEN -0.9%. CAVM -3%. BRCM -1.3%.
- Cisco's slumping FQ1 service provider (-13% Y/Y) and emerging markets (-12%) orders are bound to fuel concerns about carrier capex and macro trends. At the same time, it's worth noting Juniper and Alcatel-Lucent have been seeing better router sales to carriers (though not to Asia), and that Huawei has been doing better in emerging markets.
- The rest of Cisco's order data for major regions and customer groups was relatively better, but not exactly encouraging. Americas orders -2%, EMEA -4%, Asia-Pac (hurt by emerging markets weakness) -9%. Enterprise orders +2%, commercial (SMBs) +1%, public sector -1%.
- Switch sales (31% of revenue) rose 3% Y/Y, while routers (17% of revenue) fell 1%. Collaboration rose 1%, and service provider video fell 14% due to set-top weakness. Cisco's ASR 9000 edge router line, which EZchip (EZCH) supplies network processors for, grew 20% in FQ1 vs. 43% in FQ4.
- Data center (UCS servers) had another strong quarter, growing 44%, but still only accounts for 5% of revenue. Wireless (dominated by Wi-Fi gear) grew only 8% after growing 32% in FQ4 (could be a negative for ARUN and RKUS).
- John Chambers was asked on the CC (transcript) if the NSA spying uproar was affecting Cisco. He admitted it's a problem in China, but denied it was a major issue elsewhere.
Wednesday, Nov 135:41 PM
Wednesday, Nov 135:13 PMCisco offers poor guidance, shares tumble
Wednesday, Nov 135:13 PM| 39 Comments
- Cisco (CSCO) guides on its FQ1 CC for FQ2 revenue to decline 8%-10% Y/Y, and EPS of $0.45-$0.47. That's well below a consensus for a 4.1% revenue increase and EPS of $0.52. The networking giant is also guiding for FY14 (ends July '14) EPS of $1.95-$2.05, below a $2.10 consensus.
- Orders fell 4% Y/Y in FQ1 after growing 4% in FQ4. The two biggest culprits: Service provider orders fell 13%, and emerging markets orders fell 12% (India and China -18% each). The company isn't currently expecting order improvement in FQ2.
- Service provider weakness is blamed on soft carrier spending, declining set-top sales (attributed to product shifts and an effort to move away from low-margin deals), core router product transitions, and low-end edge router share loss (likely to Juniper).
- Also: Cisco estimates the government shutdown impacted FQ1 U.S. federal sales by $50M, and the political environment in China is said to remain "challenging."
- CSCO now -9.8% AH. Also off: JNPR -2.8%. FNSR -1.3%. More names could sell off in time.
Wednesday, Nov 134:30 PMCisco adds $15B to buyback plan; product sales growth slows sharply
Wednesday, Nov 134:30 PM| 2 Comments
- Cisco (CSCO) is adding $15B to its buyback plan, raising the size of its available authorization to $16.1B. The increase follows a quarter in which Cisco spent $2B on buybacks, up from $1.2B in FQ4 and allowing EPS to beat estimates in spite of a revenue miss.
- Also boosting EPS: Non-GAAP gross margin was 63%, above guidance of 61%-62%.
- Product revenue (78% of total revenue) grew only 1% Y/Y in FQ1 after rising 6% in FQ4. Services revenue +4% vs. +6%.
- R&D spend rose 20% Y/Y to $1.72B, as Cisco invests heavily in developing new data center switch and core router lines, among other products. Sales/marketing spend was roughly flat at $2.41B, no doubt thanks to recent job cuts.
- CSCO -2.6% AH. CC about to start, guidance should be provided.
- FQ1 results, PR
Wednesday, Nov 134:07 PM
Wednesday, Nov 1312:10 AM