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Optical/IP

Cisco CEO Sees Glimmers for the Economy

Cisco Systems Inc. (Nasdaq: CSCO) might -- might -- be seeing the early signs of business getting better, at least in the United States.

The logic laid out by CEO John Chambers on Wednesday's earnings call went like this: Cisco saw the latest downturn unfolding as U.S. state and local governments pulled back spending first, followed by enterprises, the U.S. federal government and commercial markets.

In Cisco's fourth quarter, which ended in July, the company saw "positive growth or up-trends, especially in the second half of the quarter" in all those sectors except the federal government.

That month and a half of data is way too small a sample to declare a trend happening, Chambers said. But he did say that if things continue in that direction during the current quarter, it would be a good sign for the U.S. market in general.

That doesn't mean everything is great. "Europe's going to get worse before it gets better," and federal spending isn't going to recover quickly, Chambers said. But it's a contrast to other companies' predictions of the economy continuing to dampen sales. (See Adtran Expects Flat Carrier Spending and Tellabs Joins the Party.)

Cisco expects its own revenues for the first quarter, which ends in October, to be 2 percent to 4 percent higher compared with a year earlier. That range doesn't sound so big, but the comparison is against an October 2011 quarter that was unusually good, Chambers said. (See Cisco's Comeback Quarter.)

Those figures translate into anticipated first-quarter revenues of $11.5 billion to $11.7 billion. Analysts polled by Thomson Reuters were expecting $11.66 billion.

Cisco didn't provide any new commentary about software-defined networking, not even after seeing VMware Inc. (NYSE: VMW) acquire Nicira Networks Inc. (See VMware Insists It's Not Warring With Cisco.)

Chambers reiterated Cisco's conviction to lead the SDN transition. He said Cisco's view is that hardware and software will both be important in an SDN world and that Cisco's framework, the Open Networking Environment (ONE), is an advantage over the competition, particularly when combined with Cisco's visibility into long-term customer needs. (See Cisco Takes ONE Step Beyond SDN.)

Cisco's SDN discussion usually includes a mention that the company's virtualized router, the Nexus 1000v, arrived in 2009, well ahead of the SDN trend. Chambers brought that up a couple of times during the call. SDN "didn't sneak up on us," he claimed.

He didn't get asked whether Cisco tried to buy Nicira. (See Does Cisco Need Nicira?)

— Craig Matsumoto, Managing Editor, Light Reading

Pete Baldwin 12/5/2012 | 5:23:45 PM
re: Cisco CEO Sees Glimmers for the Economy

Cisco's performance has become more and more closely tied to GDP, so the last couple of years have been uneven.


They were saying that revenues and orders will face "tough comparisons" for the next few quarters due to the surge of growth late in 2011, and that led one analyst -- I think it was Ehud Gelblum -- to ask if this is always how it's going to be, with growth coming in irregular jolts.


So, Cisco is neither a hot growth company nor a slow-and-steady big company? They increased the dividend at least (although analysts now wonder if that's going to cut into the money being used for stock buybacks).

^Eagle^ 12/5/2012 | 5:23:45 PM
re: Cisco CEO Sees Glimmers for the Economy

craig,


interesting if you look at the summary revenue tables showing growth or decline in the key market segments cisco breaks out.


switching:down


ngrouting:down


collaboration:down


spvideo:down


up were data center activity andwireless 


those two sectors were the only ones really up over the last year. they were up so much they off set the downward trends (consistent slight downward trend lines over the last 4-6 quarters) in the other 4 key sectors. 


sailboat





Pete Baldwin 12/5/2012 | 5:23:44 PM
re: Cisco CEO Sees Glimmers for the Economy

Amusingly, Cisco says it's gaining market share vs. competitors (although I think I've seen a comment elsewhere to the opposite effect).  I guess it's a matter of whose business sucks the least.  :)


Data center really was big for them this quarter, revenues up 90% and orders up 58% y/y. 

^Eagle^ 12/5/2012 | 5:23:42 PM
re: Cisco CEO Sees Glimmers for the Economy

Craig,


This big uptick in data center revenue for Cisco points to a big risk area for them.  Data centers more than any other application space are vulnerable to the trend for ODM manufacturing of key network platforms in addition to building servers.  And Data Centers are also the most targeted space for SDN and OpenFLow initiatives which are huge risks for Cisco if they loose key infrastructure plays in data centers to equipment sourced and designed under different approaches.  


No wonder Cisco is talking a big game for SDN and hoping to "re-brand" that space as Cisco's very own.  They are vulnerable to some orthogonal thinking in how you build a data center that could leave Cisco completely out.  They cannot take a risk in their high growth sector as a collapse in this would do significant damage to the top line revenue numbers.


So they have to find some way to control this space, in the same way they usurped IBM main frame attachment and main frame front ends for growth in the early to mid 90s.


hence, the huge valuations for players in the SDN space and the big talk from Cisco about how they "lead" in this space and it is a "natural" for them.


sailboat.

jes 12/5/2012 | 5:23:40 PM
re: Cisco CEO Sees Glimmers for the Economy

sailboat-whatyouquotedisdifferentfromthepublishedone.

 

<h5style="margin:0px;padding:0px;font-size:11.199999809265137px;font-style:italic;color:#222222;font-family:arial,helvetica,clean,sans-serif;line-height:10.399999618530273px;">q4byproducts(revenueyearoveryear,percentagechange)<ulstyle="margin:1em;padding:0px;list-style:none;zoom:1;color:#222222;font-family:arial,helvetica,clean,sans-serif;font-size:11.199999809265137px;line-height:10.399999618530273px;"><listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">routingincreased4percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">switchingwasflat.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">collaborationdecreased8percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">spvideodecreased2percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">wirelessincreased22percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">securityincreased8percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">datacenterincreased90percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">otherdeclined15percent.</listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></ulstyle="margin:1em;padding:0px;list-style:none;zoom:1;color:#222222;font-family:arial,helvetica,clean,sans-serif;font-size:11.199999809265137px;line-height:10.399999618530273px;"></h5style="margin:0px;padding:0px;font-size:11.199999809265137px;font-style:italic;color:#222222;font-family:arial,helvetica,clean,sans-serif;line-height:10.399999618530273px;">

<h5style="margin:0px;padding:0px;font-size:11.199999809265137px;font-style:italic;color:#222222;font-family:arial,helvetica,clean,sans-serif;line-height:10.399999618530273px;">fy12byproducts(revenueyearoveryear,approximatepercentagechange)<ulstyle="margin:1em;padding:0px;list-style:none;zoom:1;color:#222222;font-family:arial,helvetica,clean,sans-serif;font-size:11.199999809265137px;line-height:10.399999618530273px;"><listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">routingincreased2percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">switchingincreased3percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">collaborationup3percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">spvideoincreased11percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">wirelessincreased19percent.<listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">securityincreased12percent.<liid="ext-gen424"style="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http: 3.2.0="" bullet.gif);background-color:transparent;background-position:0px0.7em;background-repeat:no-repeatno-repeat;"="" cec="" framework="" i="" wwwin.cisco.com="">datacenterincreased87percent.</liid="ext-gen424"style="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></listyle="margin:0px;padding:0.22em0px0.22em0.8em;list-style:noneoutsidenone;background-image:[replacedtest4]http:></ulstyle="margin:1em;padding:0px;list-style:none;zoom:1;color:#222222;font-family:arial,helvetica,clean,sans-serif;font-size:11.199999809265137px;line-height:10.399999618530273px;"></h5style="margin:0px;padding:0px;font-size:11.199999809265137px;font-style:italic;color:#222222;font-family:arial,helvetica,clean,sans-serif;line-height:10.399999618530273px;">



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