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AT&T Fires Back On 5G Amid Verizon Push, Touts 5G To Homes

Aiming to grab some 5G limelight back from Verizon Communications ( VZ ), AT&T ( T ) announced on Friday plans for trials of next-generation 5G wireless technology in 2016 and, in a surprise, touted 5G services to fixed locations such as homes and businesses, not mobile devices. Verizon ( VZ ) in September declared its intention to be a global leader , and the first in the U.S., in rolling out a 5G wireless network commercially. AT&T has been less vocal, but on Friday CEO Randall Stephenson said in a CNBC interview that 5G speeds could potentially match fiber-optic connections to homes. “Actually, we are getting performance and testing that says that we can get as good a performance off 5G wireless technology into the home as we’re getting off fiber today,” he told CNBC. On its Q4 earnings conference call on Jan. 21, Verizon also hinted at fixed broadband. “We would hope that the FCC moves quickly to adopt the rules to facilitate 5G deployment,” said Verizon CFO Fran Shammo. “(When you) think about 5G, it may not just be about mobility. It may be about other use cases; it’s not just about mobility.” AT&T agreed to deploy fixed broadband services to homes in rural areas using 4G technology as part of conditions tied to its acquisition of satellite TV broadcaster DirecTV Group in July. On Friday, AT&T said that it will test 5G technologies in Austin, Texas, with Intel ( INTC ) and Ericsson ( ERIC ). AT&T says that it sees a role for 5G in “virtual reality, self-driving cars, robotics and smart cities.” Tech Standards For 5G Wireless Not Yet Set AT&T says that it expects 5G speeds to be anywhere from 10 to 100 times faster than 4G LTE connections, much as Verizon has stated. Verizon has said that it plans to deploy 5G commercially in 2017, though its plans are still vague. AT&T said it expects to deploy 5G after standards are set. “We’re conducting our 5G trials in such a way that we’ll be able to pivot to compliant commercial deployments once 5G technology standards are set. The international standards body, 3GPP, will likely complete the first phase of that process in 2018,” the company said in a press r elease . Europe, South Korea, Japan and China all have 5G initiatives under way. South Korea plans large-scale 5G testing around the 2018 Winter Olympics. In Japan, NTT DoCoMo ( DCM ) is gearing up for the 2020 Summer Olympics. The next World Radiocommunication Conference, where 5G spectrum allocation is expected to be discussed, isn’t until 2019. Many countries, including the U.S., are looking at high frequencies, such as 24 GHz and 37 GHz, for 5G services. However, 5G could surface earlier in bands below 6 GHz, some analysts say. In that case, networks could continue using interfaces designed for LTE gear. Also, 5G marketing battles could start long before higher-bandwidth 5G services are ready commercially.

Cisco’s Steady Q2 Helps, But Enterprise IT Sector Still Jittery

Behind the scenes, Cisco Systems ( CSCO ) did what it was supposed to do last quarter, and did it a little more profitably: It provided reliable networking gear and helped others compute and communicate faster, even as formerly highflying enterprise technology stocks crashed. After Wednesday’s close, Cisco posted fiscal Q2 earnings and sales that beat analyst expectations, as did its earnings and sales outlook for the current quarter. The company’s CEO, however, acknowledged that things have been a bit dicey. While the first 10 weeks of the second quarter, through Dec. 31, were “very much in line with what we expected … (in) those last three weeks (through Jan. 23), we saw customers just pause a bit … to see what’s going on,” Cisco CEO Chuck Robbins said on the company’s earnings conference call with analysts. “The (data center) campus refresh activities, we saw customer say, ‘Hey, our infrastructure is working. Let’s hold on that (purchase) before we see which way we’re willing to go.’ ” Added CFO Kelly Kramer: “Our guidance is prudent. We expanded our range to three (percentage) points of range rather than two, because we see things as more volatile.” For the period ended Jan. 23, Cisco said per-share earnings minus items rose 7.5% from the year-earlier quarter to 57 cents minus items, while revenue slipped 1% to $11.8 billion. Excluding year-earlier performance from the television set-top box business Cisco recently sold, revenue rose 2% . Analysts polled by Thomson Reuters had expected 54 cents and $11.75 billion. A year before, Cisco’s EPS ex items had risen 13% to 53 cents, and sales grew 7% to $11.94 billion. Cisco completed the sale of its set-top box unit to Technicolor on Nov. 20, for $600 million. Excluding that business, Cisco had guided Q2 adjusted EPS to 53-55 cents, on revenue of flat-to-2% growth. For fiscal Q3, Cisco guided to EPS ex items of 54 cents to 56 cents and to a year-over-year revenue rise of 1% to 4%. Analysts had modeled 54 cents and a 0.8% decline. Cisco is the No. 1 maker of the seldom-seen but increasingly used, lightning-fast switches, routers and other networking gear behind most telecom and Internet service providers, helping to run many data centers for many Internet cloud-based operations. Cisco stock, which rose 9% in after-hours trading Wednesday after its earnings release, was up more than 9% in early trading in the stock market today , near 24.50, despite another tough start to the market overall amid global economic worries. In Wednesday’s regular session, shares fell 0.6% to 22.51, 25% off an eight-year high of 30.31, set last March. Smaller rival Juniper Networks ( JNPR ) was up nearly 1% in early trading Thursday. Cisco’s latest results helped the outlook for information technology stocks, which crashed last week after data analytics software maker Tableau Software ( DATA ) and social media firm LinkedIn ( LNKD ) gave disappointing guidance. As global fears of a slowing economy rose, so did worries of slower IT spending. Analytics firm Splunk ( SPLK ), security vendor Palo Alto Networks ( PANW ) and cloud software leader Salesforce.com ( CRM ) were among stocks that fell hard last week, though the latter two have recovered somewhat this week. All three stocks, however, were down in early trading Thursday, as was Tableau. Cisco: Challenging Macroenvironment “We delivered a strong Q2 and are managing the business extremely well in a challenging macro environment,” Robbins said in the company’s earnings release. “We’re managing the company on two fronts. We’re focused on continued strong execution in the near term, while investing in the innovation to lead our customers into the future.” As with the sale of its set-top box business, Cisco has been shedding slow-growth lines of business while making acquisitions in faster-growing arenas. Last week, Cisco announced its agreement to acquire Jasper Technologies, which delivers a cloud-based Internet of Things (Iot) service platform, for $1.4 billion. The deal is expected to close this fiscal quarter. The company last quarter also completed the purchases of Portcullis, a digital security operation; Lancope, a security analytics firm; ParStream, another analytics specialist; and 1 Mainstream, an on-demand streaming-content company. And on the call, Cisco executives said they recently completed the acquisition of Acano to help accelerate Cisco’s collaboration strategy to deliver video more broadly. In November, Cisco entered a “strategic partnership” with Ericsson ( ERIC ) which both companies say will improve their sales by the second half of this fiscal year. Robbins told analysts that Cisco and Ericsson “have begun to close transactions together. I would not translate that to any of the numbers we put out today. … We’re at the handful stage right now, but we see that accelerating.” “We delivered a strong Q2, and are managing the business extremely well in a challenging macro environment,” Cisco CEO Chuck Robbins said in the earnings release. “We’re managing the company on two fronts. We’re focused on continued strong execution in the near term while investing in the innovation to lead our customers into the future.”

Steady Cisco May Show EPS Gain, Better Sales Pace Without Set-Tops

Steady Cisco Systems ( CSCO ) may lack the eye-catching appeal of Juniper Networks ( JNPR ) and its fast 54%-58% non-GAAP earnings growth of the last two quarters. But Steady Eddy also lacks the anxiety of Fast Eddy’s volatile sales that shrank from a year earlier in four of the last six quarters. Cisco has had only two declining quarters of earnings — not one non-GAAP loss — and two shrinking sales quarters in the last four years, the most recent contraction more than two years ago, although growth has decelerated about as often as accelerated. Unlike its rival Juniper, Cisco hasn’t logged double-digit sales growth in 16 quarters. Cisco is expected to report earnings up 2% to 54 cents per share minus items, on revenue down 1.5% to $11.75 billion, for its fiscal second quarter ended in January, according to analysts polled by Thomson Reuters. A year before, the legacy maker of switches, routers and networking equipment for telecoms, Internet service providers and big computing enterprises had reported Q2 non-GAAP EPS up 13% to 53 cents, on sales up 7% to $11.94 billion. The decline in part is due to the sale of Cisco’s television set-top-box business to Technicolor, a deal that closed in November for $600 million. Excluding the set-top-box business, Cisco guided Q2 adjusted EPS to 53-55 cents, on revenue to a range of 0%-2% growth. Cisco stock is performing a bit better than Juniper lately, though it lost 1.2% to 22.65 in the stock market today , 25% off an eight-year high 30.31 set in March. Juniper flattened Tuesday to a 0.1% gain at 21.99, 32% off a four-year high set Nov. 4 at 32.39. Cisco said it was selling the niche business to Technicolor to focus on faster growth areas. Set-top-box sales reportedly had slipped from $2.6 billion to $1.8 billion from fiscal 2013 to 2015. Cisco acquired the set-top-box operation as part of its $6.9 billion purchase of Scientific-Atlanta in 2005. Bernstein analyst Pierre Ferragu, in a research note issued Tuesday, estimated Q2 revenue would fall 1% to $11.8 billion if including set-top-box revenue of $361 million a year earlier, or rise 2% to $11.80 billion by excluding set-top-box sales a year earlier, at the high end of Cisco’s guidance. Wall Street analysts “might not have uniformly excluded (set-top-box performance) from their forecast yet,” Ferragu warned. “For the rest of the year, we expect top line growth to be supported by 1) continued strength in enterprise and commercial; 2) continued momentum in switching, (and) 3) product cycles in routing and collaboration.” He expects 4% revenue growth for the year, in line with consensus. In the last quarter, Cisco was scheduled to close the purchases of Portcullis, a digital security operation; Lancope, a security analytics firm; ParStream, another analytics specialist; and 1 Mainstream, an on-demand streaming-content company. Analysts expect to hear an update from Cisco on its “strategic partnership” with Ericsson ( ERIC ), announced in early November as the biggest deals the two had ever entered into, and expected to generate $1 billion annually in additional revenue for each by 2018. Ericsson closed up 0.6% Tuesday to 8.56. Image provided by Shutterstock .