Cisco Reaches a Happy Place

Cisco Systems Inc. (Nasdaq: CSCO) seems pretty happy about its near-term prospects, despite the gloom other companies have expressed about service-provider spending.

Cisco expects revenues of $11.4 billion to $11.6 billion for the third quarter, which ends in April. That's growth of 5 percent to 7 percent over the previous year's third quarter, and it's on par with the $11.5 billion that analysts expected, according to Thomson Reuters .

CEO John Chambers gushed about how the company's turnaround has gone -- Cisco was a quarter early in reaching its goal of saving $1 billion per year in costs, for instance. But it's worth noting that the company is predicting that third-quarter revenues could be lower than the second quarter's $11.5 billion. (See Cisco Earnings Shine in Q2.)

Still, it's a contrast to the more disappointing earnings that came around during this cycle, from companies including Acme Packet Inc. (Nasdaq: APKT), Juniper Networks Inc. (NYSE: JNPR) and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). (See Carrier Bug Bypasses Infinera, Bites Acme Packet, Juniper Points to the Economy and Tellabs to Restructure, Cut 530 Jobs.)

Cisco took the opportunity to pick on Juniper a little, without mentioning the company by name. Juniper saw router sales drop 20 percent compared with a year earlier and reported weaker sales in China and Japan. Cisco's experience has been "just the opposite," CFO Frank Calderoni said. (See Juniper Points to the Economy.)

Even so, Cisco is "mindful of the possibility of slower IT spending in 2012," Calderoni said, and he overtly asked analysts to keep their forecasts conservative.

Separately, Chambers teased that Cisco is back in buying mode: "We expect to be more active on acquisitions in the quarters and years to come," he said without elaborating.

If you're wondering, Cisco says it's got $5 billion cash available in the United States. Cisco keeps saying that its U.S. spending is stifled by the tax implications of repatriating any of its overseas cash. (See Chambers Floats His Stimulus Plan and Bringing Cisco's Money Home.)

— Craig Matsumoto, Managing Editor, Light Reading

Pete Baldwin 12/5/2012 | 5:43:09 PM
re: Cisco Reaches a Happy Place

Sounds like Cisco might be losing the margin war. I think Ittai Kidron of Oppenheimer pointed out that product gross margins of 60.9% are an all-time low? I'll have to re-listen to that part of the call.

Pete Baldwin 12/5/2012 | 5:43:07 PM
re: Cisco Reaches a Happy Place

They were quite happy with UCS: sales up 91 percent year-over-year, and that doesn't count the Nexus 2000 or 5000, which are included in the Switching category.

catalyst 12/5/2012 | 5:43:07 PM
re: Cisco Reaches a Happy Place

It is interesting to know that UCS sales number doesn't include 2K/5K numbers.

If i remember right last year some comments about Cisco included these switching numbers also as part of UCS that made them look like they are number 3 in blade market. I am not sure whether this true or not. Only Gartner can tell.

Without 2K/5K included, it will be interesting to see where they will be positioned in overall blade market this time.

catalyst 12/5/2012 | 5:43:07 PM
re: Cisco Reaches a Happy Place

It looks like, no data they shared this time.

As i see it, first hop FCoE consolidation is started picking up. 

Any one to comment?

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