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Optical/IP

What's Next? Cisco, of Course

Could the IP routing market stand any more cheering on this week? Apparently.

In perhaps the most obvious case of connect-the-dots, it appears that much of the telecom world now expects Cisco Systems Inc. (Nasdaq: CSCO) to have an exciting quarter, based on Juniper's solid results and the investment community's rousing response (see Juniper Confidently Carries Q4 and En Fuego!).

In a curious twist, even Scott Kriens, the CEO of Juniper Networks Inc. (Nasdaq: JNPR), Cisco's largest rival, said in the quarterly conference call Thursday night that the strength he saw in the market was likely to translate into a good quarter for Cisco.

Cisco is continuing to make headway with sales to telecom carriers, according to a research note today by UBS Investment Research analyst Nikos Theodosopoulos.

The analyst didn't name any of the purchasing carriers, but he wrote that his channel checks suggest Cisco will haul in about $51 million more in quarterly revenues than he'd previously projected. His revised estimate has Cisco earning 18 cents a share on revenues of $5.356 billion in the current quarter, compared to the previous estimate, which had Cisco earning 17 cents a share on revenues of $5.305 billion.

"We estimate that sales to telecom carriers (25 percent of total sales) are tracking up 10 percent to 15 percent sequentially and sales to enterprises (75 percent of total sales) up 2 percent to 4 percent," wrote Theodosopoulos.

Cisco's position is improving with carriers, and that's noteworthy but not surprising, given how its competitors have fared in the past three months. Juniper trounced its quarterly revenue expectations by $25 million (see Juniper Confidently Carries Q4); Procket Networks Inc. bagged $30 million in new funding (see Procket Stuffing Its Pocket); and Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) finally found a prom date (see Avici, Nortel Get 'Strategic').

Cisco is set to announce its results for its second fiscal quarter of 2004 on February 3. Theodosopoulos's numbers are slightly higher than what analysts are expecting from Cisco, on average, for the current quarter. Analysts surveyed by Reuters show Cisco earning about 17 cents a share on revenues of $5.275 billion.

Most telecom-related stocks had a banner day (see En Fuego!), and Cisco shares climbed $1.97 (7.25%) to $29.13.

— Phil Harvey, Senior Editor, Light Reading

BobbyMax 12/5/2012 | 2:40:12 AM
re: What's Next? Cisco, of Course Cisco has been trying very hard to penetrate RBOCs for at least 7-8 years. First it tried with Qwest and then BellSouth. No RBOCs would buy from Cisco unless the same equipment is available from tradional telecom companies such as Alcatel, Nortel, and Fujitsu etc. BellSouth may have done some testing with ONS 15454 SONET Multiservice Provisioning Platform (MSPP). I would be very much surprised if any traditional service provider buys from Cisco. If they do, they should be out of their minds. Cisco was also trying very hard to sell ONS 15454, but this attempt was largely unsuccessful.

Cisco has also been trying to sell VOIP equipment to RBOCs. Any eployment of VOIP would have disasytrous consequences.
technonerd 12/5/2012 | 2:40:09 AM
re: What's Next? Cisco, of Course I would be very much surprised if any traditional service provider buys from Cisco. If they do, they should be out of their minds.

Cisco's equipment is not carrier class; it is not modular; it doesn't lend itself to incremental upgrades; it is endlessly configurable but many of the configurations don't work right, and Cisco is not good at providing quick service. Also, Cisco's margins are too high; suppliers to the RBOCs rarely have gross margins as high as 50% let alone what Cisco has been reporting.

Cisco's data-centric people and organization clashes very badly with the RBOCs, who understand that service availability is the entire basis for their ability to operate one of the world's great cash-cow businesses.

I think the RBOCs are pretending to do more business with Cisco. This is because Cisco and the rest of Silicon Valley have provided the RBOCs with lobbying support in their efforts to kill the Telecom Act. From Cisco's point of view there wasn't much choice; the CLECs were outright frauds and their collapse left Cisco and much of the rest of Silicon Valley telecom suppliers high and dry.

But when it comes to Big Business, they tend quite strongly to scratch each others' backs and engage in much face saving. The RBOCs have Cisco over a barrel, but they also can very much use the lobbying help and can benefit from Silicon Valley not portraying them as clueless dinosaurs. Thus, Cisco and the Valley have pitched in on behalf of the RBOCs, and the RBOCs have thrown a few crumbs and some press releases in return.

The formal lobbying group that went into the RBOCs corner is called TechNet. (www.technet.org) Click on "Who We Are" and you'll see that all the heavy-hitters of the Valley are there. Kleiner Perkins, Cisco, Intel. The whole ball o'wax. Now go back to the home page and scroll to the second article from the bottom, Broadband network could create more than 1.2 million jobs.

It's essentially a brief for the RBOCs back when they wanted to re-create their monopoly over the telephone access network. This was the regulatory proceeding in which Colin Powell's son, who wanted to run for the Senate from Virginia, carried the RBOCs' water for them and got his wings clipped when Martin wouldn't goose-step to his tune. (An aside: The Powells are good at carrying water. Witness Colin Powell's masterful performance at the United Nations in February 2003, in which he told a pack of lies to the whole world about weapons of mass destruction and links between Iraq and al-Qaeda. The apple doesn't fall far from the tree.)

Anyway, if you scroll to the very end of that Broadband article, you'll see the following: Financial support for the publication of this final report has been provided by Verizon. Beyond TechNet as an organization, the individual CEOs did a bunch of lobbying in Washington for the RBOCs, and continue to do so. And there are other efforts, such as a meeting in October where the RBOC trade association got together with the big equipment suppliers to form a cartel of sorts.

http://news.com.com/2100-1037_...

In this situation, it must be remembered that the RBOCs have the whip hand. They're the only significant domestic market for telecom equipment. The CLECs were frauds, and most of the stuff they bought was purchased from VC/Wall Street keritsu companies who weren't in the business of making equipment that worked but rather were in the business of making IPOs that went up.

Iipoed 12/5/2012 | 2:40:04 AM
re: What's Next? Cisco, of Course "Cisco has been trying very hard to penetrate RBOCs for at least 7-8 years" and on and on


bobby you are such an idiot. Get a clue. Where do you come up with such nonsense. You are not even humerous any longer just plain out of touch with reality. I certainly am no crisco bigot but there is such a thing as reality. You should try to experience it sometime.
technonerd 12/5/2012 | 2:40:00 AM
re: What's Next? Cisco, of Course bobby you are such an idiot. Get a clue. Where do you come up with such nonsense. You are not even humerous any longer just plain out of touch with reality. I certainly am no crisco bigot but there is such a thing as reality. You should try to experience it sometime.
He was absolutely right about Cisco's efforts to penetrate the RBOCs. Sure, Cisco sells them routers but they've been notably unsuccessful in many other equipment categories -- DSLAMs being a good example. It would be very interesting to see a detailed breakdown of Cisco's carrier sales. I wonder how much of the sales is really of enterprise equipment, with the enterpise happening to be a telecom carrier.

I am quite skeptical that Cisco will replace PCM/TDM within the RBOCs. It doesn't make sense for it to happen. The RBOCs like to have multiple suppliers; open standards; <50% supplier gross margins; stuff that works; incremental upgrade paths.
change_is_good 12/5/2012 | 2:39:59 AM
re: What's Next? Cisco, of Course >>> bobby you are such an idiot. Get a clue.

that is so true.

the two companies he mentioned have combined, bought+resold, at least $1.3B in product from csco over that timeframe.

there's nothing like taking care of each others bottom line.

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