Tag Archives: csco

Cisco Pressured By Enterprise Trends Ahead Of Fiscal Q3 Earnings

Negative trends in the enterprise market — large companies and government agencies — are lowering expectations ahead of Cisco Systems ‘ ( CSCO ) fiscal Q3 earnings, due out Wednesday after the market close. Many large companies are outsourcing business computing workloads to cloud computing service providers such as Amazon Web Services, part of Amazon.com ( AMZN ), lessening their need for the routers, switches and other networking gear sold by Cisco and others. Analysts polled by Thomson Reuters estimate Cisco earnings minus items will rise 2% to 55 cents, though they see revenue falling 1% to $11.97 billion. “We see three major issues into this earnings release, including weak IT data points, all signaling industrywide IT spending weakness, less visibility around service provider spending, and global macro exposure,” Kulbinder Garcha, a Credit Suisse analyst, said in a research report. “Year to date, we have seen weak IT spending indications from large bellwethers including IBM ( IBM ), EMC ( EMC ), Juniper ( JNPR ), Brocade ( BRCD ) and SAP ( SAP ),” added Garcha, who has an underperform rating on the stock. JPMorgan analyst Rod Hall, in a research report, cited negative enterprise market commentary from Intel ( INTC ), Oracle ( ORCL ) and Hewlett Packard Enterprise ( HPE ). Reports of slower tech spending was a factor in the stock market’s plunge early in the year. With many tech companies struggling to meet expectations recently, an in-line quarter for Cisco might be good enough to move shares higher, said Citigroup analyst Jim Suva. RW Baird’s Jayson Noland was another analyst citing slower spending of late. “Our partner survey results indicate a softer-than-expected April quarter, with improved prospects for growth for the remainder of calendar 2016,” Noland wrote in a research note. Cisco stock, up 1% near 27 in early trading in the stock market today , is about even in 2016. Cisco stock is up 20% since touching a two-year low in early February.

Acacia Communications Bolts, Giving Silent Tech IPO Market A Jolt

The tech IPO market remains in the doldrums, but it got a spark with Acacia Communications ( ACIA ), which turned in a strong debut on its first day of trading Friday. For its initial public offering, Acacia priced 4.5 million shares at $23 a share, the high end of its estimated range, raising $104 million. In afternoon trading in the stock market today , Acacia stock was above 31, up 35%, on volume of more than 3 million shares. The company makes chips that boost the speed and performance of optical communications networks used by cloud infrastructure operators and other content service providers. Its products include low-power digital signal processors that are application specific. It also makes silicon photonic chips that help facilitate data speeds of up to 400 gigabits per second, for use in data centers. It is also developing optical interconnect modules that will enable transmission speeds of 1,000 gbps and more. “We believe we are leading a disruption that is analogous to the computing industry’s integration of multiple functions into a microprocessor,” the company said in its IPO prospectus . The Maynard, Mass.-based company has grown rapidly. Revenue rose 64% in 2015, to $239 million. It reported 2015 net income of $40.5 million, up from $13.5 million in 2014. First-quarter revenue rose 78% to $47.2 million, with net income of $14.6 million. Acacia has about 25 customers, of which the top five account for about 83% of revenue. Its largest customers are ADVA Optical Networking North America, ZTE Kangxun Telecom, Coriant, and Alcatel-Lucent, it says in its IPO prospectus. Competitors include  Cisco Systems ( CSCO ), Broadcom ( AVGO ), Finisar ( FNSR ) and Ciena ( CIEN ).  

Cisco At Risk As Workloads Shift To Public Cloud, Amazon: JPMorgan

Corporate America may need fatter communications pipes for cloud computing, but the trend toward lower-cost hardware in data centers — including networking gear — doesn’t bode well for Cisco Systems ( CSCO ), says a JPMorgan report. Despite the rise of Amazon.com’s ( AMZN ) Web Services unit and Microsoft ’s ( MSFT ) Azure, money spent on public cloud computing services will account for only 7% of the $215 billion global data center market in 2016, JPMorgan analyst Rod Hall said in a recent note to clients. Hall forecasts that from 2016 to 2020, traditional data center infrastructure spending will fall at a 2% rate annually. The bigger problem for legacy information technology suppliers is that computer workloads are moving at a faster rate to infrastructure-as-a-service, or IaaS, providers, he says. Amazon Web Services is the biggest IaaS provider, through which customers rent computer servers and data storage systems via the Internet. Microsoft is No. 2, with Alphabet ’s ( GOOGL ) Google third. According to a JPMorgan survey of chief information officers, more than 40% of workloads could shift to the public cloud in five years. “A near-tripling of public cloud workloads represents a monumental architectural shift, which shows no signs of abating and is likely to create a major ripple effect across the entire technology landscape,” wrote Hall. “(We) continue to believe it represents material earnings risk for companies like Cisco.” Hall added: “Though companies like Cisco focus on the increased bandwidth required for big data they miss the fact that this inevitably drives companies to want to deploy commodity (data center) solutions faster in our opinion.” Cisco reports fiscal third-quarter earnings on May 18 after the market close.