iStockphoto | dny59

Marketo, a cloud-based marketing software company, debuted on the Nasdaq today under the ticker symbol MKTO at $13 a share and closed at $23.10. Its biggest shareholder is venture capital firm InterWest Partners, whose 33.3 percent stake was worth $302 million pre-sale and is now worth north of $565 million.

Tableau Software started trading on the New York Stock Exchange under the ticker symbol DATA. Its shares were priced yesterday at $31 and closed today $50.75. Its biggest shareholder is New Enterprise Associates, which invested a combined $29 million in three rounds between 2004 and 2010 for about 37 percent of the company.

It sold two million shares at $31 in the offering, but still has 17.6 million shares remaining, making its combined gain on Tableau, by my math, worth $955.2 million. On paper that amounts to a one-day gain of 3,194 percent.

Now are you convinced the IPO market is back?

The move is meant to regain the trust of Bloomberg’s terminal clients, like J.P. Morgan and Goldman Sachs. They’re understandably perturbed by revelations that reporters at Bloomberg News used a function that tracks how recently a client has logged in as a way of generating story leads about personnel changes.

Palmisano, Bloomberg said in a statement, will “immediately undertake a review of the company’s current practices and policies for client data and end user information, including a review of access issues recently raised by the company’s clients.” He’ll report directly to the company’s board of directors. Helping him will be the Hogan Lovells law firm and the Promontory Financial Group.

One wonders if part of the job will be to conduct a full audit of how many reporters used the controversial “Z function” to view client activity, how often it was used and what the result was, specifically if its use led to stories that were published. As I wrote earlier this week, that data probably exists, because Bloomberg has always been a big data company with a knack for keeping track of what its reporters do. And if there is an audit, will its results be publicly disclosed?

The function in question showed two bits of data that have made Bloomberg clients — essentially the who’s who of Wall Street and the financial industry in general — a little queasy. First, it reveals the last time a person logged in to his or her terminal. Reporters would sometimes use that to start asking questions about whether or not someone had left a given firm, and, if they had, write a story about it.

The other thing it was said to show is how often a client used a given function, though not in such granular detail that you could see what stocks or bonds were being researched. But again, it’s the sort of thing that might lead to questions that wouldn’t otherwise be asked, and eventually to stories that wouldn’t otherwise have been written.

Bloomberg also named its editor at large, Clark Hoyt, a former public editor at the New York Times, to review the relationship between Bloomberg’s commercial operations and its news operations.

(Of course, in the interest of full disclosure, I should remind you that for about a year during 2009-2010, I was an employee of Bloomberg News after the company bought BusinessWeek magazine from the McGraw-Hill Companies and relaunched it as Bloomberg Businessweek.)

The London-based financial newspaper (and competitor to The Wall Street Journal, which, like this website, is owned by News Corp.) saw both its main website and several Twitter accounts attacked, according to a report by another British newspaper, the Telegraph.

As of 10:30 am ET, Twitter accounts belonging to the FT’s Lex column, its tech news section and a few others were all suspended.

But this attack was a little different from the more recent moves by the pro-Assad group. Lately, they’ve stuck to attacking the Twitter accounts of Western media organizations including CBS, the BBC, the Guardian and the Onion. This time, they actually attacked the main website, as well, and left headlines announcing that they had visited.

Zach Seward of Quartz.com nabbed a screenshot, which he shared on Twitter:

Syrian Electronic Army appears to have hacked the Financial Times tech blog http://t.co/M2RAVhgDP3 @fttechnews http://t.co/A3r2JVuZWm

about 18 hours ago via webReplyRetweetFavorite

@zseward

Zach Seward

The bigger of today’s two is Tableau Software, which specializes in data visualization. Yesterday, the company announced that the shares priced at $31, raising north of $254 million in the process.

The company will be listing on the New York Stock Exchange with the ticker symbol DATA. Goldman Sachs and Morgan Stanley are running the deal. Credit Suisse, J.P. Morgan, UBS Investment Bank, BMO Capital Markets and JMP Securities are also underwriting.

Tableau’s biggest shareholder is the venture capital firm New Enterprise Associates, which led two investment rounds for a combined $15 million, the last being a $10 million series B in 2008 in a deal led by Forest Baskett. NEA’s stake amounted to about 37 percent before the sale, worth more than $607 million at the share offering price.

Founder and chief scientist Pat Hanrahan has about 18 percent of the company, worth about $295 million at the offering price. His co-founders — Christian Chabot, chairman and CEO, and Christopher Stolte, chief development officer — have about 15 percent each, with both stakes worth north of $235 million. Meritech Capital Partners has a stake amounting to about 6.5 percent, worth more than $102 million at the offering price.

The other one going today is Marketo, the cloud-based marketing software company. Market price yesterday was at $13 a share, raising almost $79 million. It will trade on the Nasdaq under the symbol MKTO.

Goldman Sachs and Credit Suisse are leading the offering. UBS, Canaccord Genuity, Raymond James and JMP Securities are also underwriting.

Marketo’s biggest shareholder is InterWest Partners, which prior to the sale had a 33.3 percent stake worth more than $302 million. Storm Ventures has a stake of a little more than 17 percent, worth $66 million. Battery Ventures, which led a $50 million Series F in 2011, has a 7 percent stake, worth about $28 million.

Brian Krzanich, who was recently named chief executive, said that although Intel has been slow to respond to the rapid rise of tablets and smartphones, the company is well-positioned to participate going forward.

Read the rest of this post on the original site »

Earnings per share were at 21 cents, a whopping 14 cents below the consensus view, while revenue, at $14.07 billion, was above the forecast by about a half-billion dollars.

During a conference call with analysts that wrapped up just a little while ago, Dell management struck a tone of sticking to its strategic guns. With the PC market contracting fast, it has gotten selectively aggressive on pricing in order to try and take share away from rivals like Hewlett-Packard and Lenovo. At the same time, the results show growth in expenses like research and development spending that aren’t exactly helping gross margins.

In short, Dell is starting to act a lot more like the privately held company it expects to be before the summer is over, accountable only to its owners.

In their questions, analysts sought to tease out what details they could about the effect of the proposed go-private transaction on things like employee retention and relationships with key customers. CFO Brian Gladden and head of investor relations Rob Williams shot those questions down.

Here’s a summary of the substance of the conference call (all times are Pacific):

1:46 pm: On hold waiting for the conference call to begin with what sounds like some Vivaldi playing in the background.

And now things are getting under way.

Standard conference call boilerplate from head of investor relations Rob Williams.

Brian Gladden is speaking. “We continue to invest in strategic capabilities.” He’s talking about the acquisition of Entratius, which closed last week.

Gross margin was down 40 basis points sequentially.

“We continue to face a competitive pricing environment … and this has affected our profitability.”

Selling and general costs were up 4 percent.

R&D spending is up 33 percent.

Gladden: There were almost $90 million worth of expenses related to the go-private transaction that were excluded from the non-GAAP figures.

1:54 pm: Tom Sweet is talking about business segments. Here comes the news on server sales that Michael Dell said was going so well.

Servers, Networking and Peripherals saw sales grow by about 10 percent, but sales of storage fell about 10 percent.

Sweet: “Dell powers four out of the top five search engines and 75 percent of the top social media sites worldwide.”

Sweet is covering a few customer wins. And now he’s on to software. Revenue was $295 million and had an operating loss of $85 million. “We remain confident that the Quest acquisition (which was $2.4 billion) will be accretive by FY 2015.

Sweet is talking about End User Computing, a.k.a. the PC segment, and says the environment continues to be competitive. The plan is to try and cut $1 billion out of operating costs by 2015. But customers are “diverting spending to alternative mobile solutions.” Does he mean iPads? Yup.

2:01 pm: Sweet is talking about a big PC win with Marsh and McClennan that has 55,000 seats. “We won despite a key competitor that was a longtime incumbent.” Who? HP maybe?

Question and Answer session is getting underway. First is Katy Huberty from Morgan Stanley. “Can you step back and say if the margin decline is what you expected when you rolled out the more aggressive pricing strategy?”

Gladden: We’ve been talking about this for a few quarters, the need to adjust pricing. There are parts of the business where we are beginning to see some elasticity. Demand has been weaker than expected. These are accounts that we’re gaining that we feel good about their profitability. We feel for the long term we think it’s the right thing to do. If you look at the share dynamics, we did improve our share position in a market that is pretty tough.

A question from Tony Sacconaghi of Sanford Bernstein: Is there a minimum level of profitability that you are willing to sustain in an effort to hold or gain share? Also a question about cost-cutting.

Gladden: Without providing details of specific initiatives, we have continued to take cost out of the business. We are choosing to reinvest those dollars in sales and R&D. I think those things are going on concurrently. (Essentially what he’s saying is that Dell is acting like it’s a private company already.)

As Gladden is speaking I’m looking at the slide presentation. The worst geographically was Asia-Pacific, where sales fell 12 percent year on year. Ouch. Sales in the Americas were up slightly. The BRIC countries fell 17 percent, led by China which fell 24 percent. Super ouch.

Maynard Um: Are customers holding out given the go-private transaction?

Gladden: The customer base has been very supportive of the company. For the conversations I have been a part of they have resulted in many opportunities for the company.

FYI Dell share price update: In after-hours, Dell is trading at $13.37, which is 28 cents below the $13.65 that Michael Dell and Silver Lake have offered shareholders to take it private.

2:11 pm: Question from Steve Milunovich from UBS. He’s asking about changes in sales model on PCs that’s expected as Dell goes private.

Gladden: I wouldn’t say our strategy has changed at all. We’ve adjusted our pricing accordingly and expanded our offerings across the portfolio. This is not a new strategy or business model for us. It’s adjusting tactics given where the market is going.

Question from Credit Suisse: In terms of pursuit of new PC customers, have you put the investments in that you need to or is there more effort to come through?

Gladden: Basically says the strategy hasn’t changed.

Question from Deutsche Bank, asking about servers and the storage business. Servers are good but he says storage doesn’t seem to be getting good attach rates.

Gladden: With servers, we’re winning in the marketing. And when you look at density-optimized servers, we’re winning. We feel good about the server business. You don’t see us trading price for growth there.

About storage. We feel like that business is growing with the market. It’s shrinking with the market. That is not what we’d like to see, obviously. We’re working on it. We’ve added commercial resources over the the last 18 months. We feel positioned to out perform the market.

Question from Keith Bachmann at BMO: How might the M&A strategy differ if the go-private transaction happens? Also about employee retention during the transaction.

Rob Williams: No answer to the first question.

Gladden: Attrition has been about normal for us.

Another question: Does the PC market get softer or better over the next four to six quarters?

Gladden: There are multiple dynamics playing out. There’s a lot driving a refresh cycle. We see improvements in corporate and SMB segments. But we see consumer and government, not so good. Windows 8 has not been the catalyst to growth that we hoped it would be. (That’s a big admission.) You look at recent external data, and we would expect to see over the next few quarters declines in PC demand. We’re trying to run the business based on that.

2:22 pm: Can you update us on the peformance of Quest in the quarter?

Gladden: It’s progressing as expected. We expect it to be accretive in the first fiscal quarter of next year. (Or a year from now.)

Question from Bill Shope of Goldman Sachs, about the PC pricing reductions: Which accounts are the ones that get the discounts? Where do you draw the line on profit vs. market share?

Gladden: We know where long-term strategic accounts are. In many cases those are accounts we’ve had before and have walked away from. I think we’ve been selective. There are clearly some unit volume opportunities where we can sell a lot of units, but they don’t create any profit benefits.

2:29 pm: One last question, this one on support and deployment revenue, which was up.

Tom Sweet: We’re happy with the attach rate there. The team has seen some good things with support products. We’ve been able to keep the attach rate relatively high. Despite downward pressure, it will be a good business.

Gladden: We think that’s a good business on the enterprise side, too.

And that ends the call. Thanks for tuning in!

Earnings on a per-share basis were 21 cents on sales of $14.07 billion. That’s versus a pre-leak consensus of 35 cents on sales of $13.5 billion. Sales were obviously better than expected, but profits were substantially lower.

On a year-over-year basis, sales fell 2 percent. Profits on a non-GAAP basis fell 51 percent. The fall was led by end-user-computing, Dell’s mainstream PC business. Sales there fell 9 percent, and the unit’s operating margin fell 65 percent. That’s where the pain point is.

Enterprise sales grew by about 10 percent to $3.1 billion. Services revenue grew to about 2 percent. Software sales were $295 million but that unit ran at an operating loss.

Here’s Dell’s original announcement:

Dell Reports Fiscal Year 2014 First Quarter Financial Results

Revenue of $14.1 billion
Enterprise Solutions, Services and Software revenue up 12 percent
GAAP earnings of $0.07 per share; non-GAAP earnings of $0.21 per share

ROUND ROCK, Texas–(BUSINESS WIRE)–

Dell today announced fiscal 2014 first quarter results, with revenue of $14.1 billion, as the company grew revenue from Enterprise Solutions, Services and Software 12 percent year over year to $5.5 billion, or 8 percent growth, excluding the acquisition of Quest Software. Pricing adjustments that affected gross margins and continued acquisition-related costs in the quarter resulted in GAAP earnings of $0.07 per share and non-GAAP earnings of $0.21 per share.

“We made progress in building our enterprise solutions capabilities in the first quarter and are confident in our strategy to be the leading provider of end-to-end scalable solutions,” said Brian Gladden, Dell chief financial officer. “In addition, we have taken actions to improve our competitive position in key areas of the business, especially in end-user computing, and it has affected profitability. We’ll also continue to make important investments to support our strategy and drive long-term profitability.”

Results

Revenue in the quarter was $14.1 billion, a 2 percent decrease from the previous year.

GAAP operating income for the quarter was $226 million, or 1.6 percent of revenue. Non-GAAP operating income was $590 million, or 4.2 percent of revenue.

GAAP earnings per share in the quarter was 7 cents, down 81 percent from the previous year; non-GAAP EPS was 21 cents, down 51 percent.

Cash used in operations in the quarter was $39 million. On a trailing, 12-month basis, Dell has generated $3.4 billion in cash flow. Dell ended the quarter with $13.2 billion in cash and investments.

 
Information about Dell’s use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below. Non-GAAP financial information excludes amortization of purchased intangibles, severance and facility-actions, acquisition-related charges, costs incurred in Fiscal 2014 related to Dell’s proposed merger, and other items. All comparisons in this press release are year over year unless otherwise noted.

Operating Segments Summary:
As previously announced, Dell has realigned its global operating segments to its end-to-end solutions portfolio in the Enterprise Solutions Group, Dell Services, Dell Software Group, and End User Computing Group.

Enterprise Solutions Group revenue was $3.1 billion, a 10 percent increase. Operating income for the quarter was $136 million, a 71 percent increase. Dell server and networking revenue increased 16 percent as the company gained share in the calendar first quarter. Dell networking continued to deliver strong growth, with a 24 percent revenue increase, including a 46 percent growth in the company’s Force10 business. Dell storage revenue declined 10 percent.

Dell Services revenue grew 2 percent to $2.1 billion driven by an 11 percent increase in revenue for infrastructure, cloud and security services. Support and deployment revenue increased 2 percent and applications and business process services declined 15 percent. Operating income was $370 million, a 10 percent increase.

Dell Software revenue was $295 million, resulting in an operating loss. Dell enhanced its software capabilities during the quarter, investing in additional sales capability and research and development. Consistent with the company’s business strategy when it acquired Quest Software, this business is on track to be accretive to earnings in the first quarter of fiscal year 2015.

End User Computing revenue was $8.9 billion in the quarter, a 9 percent decrease. Operating income for the quarter was $224 million, a 65 percent decrease. Dell desktop and thin-client revenue declined 2 percent, mobility revenue declined 16 percent, and software from third parties and peripherals revenue declined 6 percent.

Company Outlook:
Given the company’s announcement on Feb. 5 of a definitive merger agreement to take Dell private, the company is not providing an outlook for the fiscal 2014 second quarter.

First off, Dell has moved up the date of its report. Originally set for May 21, the results will come after markets close in New York today and a conference call with analysts will start at 1:45 pm PT.

The reason for the change likely has a lot to do with the fact that Dell is probably going to report another miss on its consensus numbers. Analysts polled by Thomson Financial expect Dell to report a 35 cent per-share profit on sales of $13.5 billion. But as The Wall Street Journal reported Monday, Dell expects to announce profits of about 20 cents on $14 billion in sales, a huge bottom-line miss.

It’s difficult to expect much else. Despite all the efforts made in recent years to nudge Dell in the direction of becoming a more enterprise-focused company via acquisitions in the areas of cloud computing, software and services, Dell still derives about 70 percent of its sales, give or take, from consumer or commercial PCs or PC-related accessories like monitors. And as we all know, PC sales are plummeting at a historic rate.

That’s not to say there aren’t potential bright spots. CEO Michael Dell has been crowing about the company’s success in server sales and has described market share losses by rival Hewlett-Packard as “staggering.”

Then, of course, there’s the ongoing saga of Dell’s quest to go private in a $24.4 billion buyout transaction with Silver Lake Partners. Carl Icahn and Southeastern Management, which between them control about 13 percent of Dell shares, are opposed and this week made their own counter-offer, and then nominated a slate of directors to replace Dell’s current board. Icahn has made no secret that he’d like to send Michael Dell packing. The special committee of Dell’s board overseeing the buyout process has asked the Icahn camp for more information.

Certainly there will be questions for management about all of it, though the answers from Dell management will probably be some variation of “no comment.”

By 7:30 pm ET, Cisco shares had risen to $23.06, having closed at $21.21 during the regular session. Its results, reported earlier today, were only slightly ahead of the consensus view, but as with so many things today, slightly good is good enough.

The better news is that Cisco has historically been a pretty good barometer on the state of the tech economy generally. What it sees in its results, good or bad, is what other companies usually see within a couple of quarters.

“Slow and steady growth” was the phrase of the day. Sales grew by slightly more than 5 percent, but several segments grew faster. Service revenue grew by more than 7 percent year on year, while sales of products grew 5 percent.

Products sold into data centers, mainly servers in Cisco’s UCS line, grew by a healthy 77 percent, but accounted for only $515 million, or slightly more than 4 percent of sales. Wireless sales grew by 27 percent, but at $523 million weren’t much bigger as a percentage of revenue.

Service provider video grew 30 percent, accounting for nearly $1.3 billion in sales. And at least part of that growth can be attributed to NDS, the Israeli software company for which Cisco paid $5 billion last year.

In switching, Cisco’s biggest business segment, sales were $3.4 billion, down 2 percent year on year, but when you compare that to the results of other networking companies like Juniper, Riverbed and F5 Networks that have been reporting more difficult quarters in recent weeks and months, a drop of 2 percent isn’t so bad.

I just got off the phone with Cisco CEO — and D: All Things Digital speaker — John Chambers. A quick summary of our conversation is below:

AllThingsD: John, it felt like a fairly positive quarter in a tough environment. What’s really going on?

Chambers: I’d break it into four pieces. First, it was our ninth consecutive quarter with record revenue. And it was the sixth where earnings grew faster than revenue. That’s a pretty good indicator that we’re growing well in a tough environment. Secondly, we’ve moved from being the No. 1 communications company to having a shot at being the No. 1 IT company at the moment when those two things will actually combine. … It’s that transition that we now have in front of us that’s kind of exciting. It also says that we’re in the right technologies: Cloud, data center, mobility, video. We’re also the thought leader on the Internet of everything, which will be the next major transition for the enterprise and service providers. The fourth one was the geographic breakdown. I don’t think anyone saw as strong a set of numbers in the U.S. as we did, and it was across all market segments. Public sector grew 5 percent, enterprise grew 10 percent, commercial grew 13 percent, service providers grew 10 percent. It means that our relevance is changing. It also means that, barring a surprise, the U.S. economy is going to continue to recover at this pace. And it has to for the rest of the world to come out of all this.

Let’s talk about IT. If you’re becoming more of a general IT player, if you see yourself shaking up that business, then who do you see yourself taking business away from?

In the data center, it’s clearly the IBMs, the Hewlett-Packards and the Dells of the world. In the wireless space, it’s often the startups or some of the traditional players. It wasn’t so long ago that startups like Aruba were awfully tough on us. In the data center with software and hardware and silicon coming together, there’s the people who think it’s going to be a software-only world [like Big Switch --Ed.]. We think it’s an architectural play that we’re going to win on. So our competitors are different in every category, but that’s what you want. If the customers are going to buy an architecture that solves a business problem and you’re the only major supplier that crosses the service provider and the enterprise and commercial segments, and you go from the cloud and hybrid clouds to the data centers, and reach any device and you’re agnostic about whatever device it is, that is a strong position to be in.

And still one of your biggest segments, switching, was down slightly. What’s going on there?

It has been a tough environment there. As you know, our industry peers have had terrible year-to-date numbers on their stocks. When I look at the F5s and Junipers and Riverbeds of the world, you’re seeing them surprising the market and declines in their share prices. Same thing with the IT players. We’re one of the few players that hit and exceed expectations in that category. So it speaks to our relevance changing. If you’re selling standalone products, the market gets really tough. And speaking of our competitors, a lot of them said they never saw us coming. We’re pretty good at flying under the radar at first and then blowing right by, and then being tough. We’re really tough to beat.

It’s at this point that I pick a song that I think best portrays Cisco’s results. It has become a little tradition that I began when Cisco started to turn around after another sequence of disappointing quarters, and when we talk, Chambers always asks about it.

With the phrase “slow and steady” appearing so much in Chambers’ comments, and with the quarter’s results generally feeling upbeat, I thought the muscular 1971 Aretha Franklin classic “Rock Steady” fit the bill. Here it is.

Earnings on a per-share basis were 51 cents on sales of $12.2 billion. Both numbers beat the consensus of Wall Street analysts, who had expected earnings of 49 cents on sales of $12.18 billion.

Gross margins were 63 percent, which is about flat from the year-ago quarter. Sales in the Americas grew the most and were flat or slightly down in EMEA and Asia. Chambers said on the conference call with analysts, which is just getting under way, that sales in emerging countries showed “double digit” growth on a percentage basis.

Overall sales grew 5 percent. Here’s a snapshot from Cisco’s presentation slides, showing sales in various segments. As you can see, the data center business continues to grow like crazy, but it’s still a relatively small segment within Cisco. Service provider video grew nicely as well, as did the wireless segment. Switching, a key segment, was down. Chambers said that was because of weaknesses in Europe and in public sector spending generally.

CFO Frank Calderoni said the company expects fourth-quarter sales to grow year on year in the range of 4 percent to 7 percent, which works out to about $12.2 billion to $12.5 billion in sales, which is more or less in line with what the Street expects. He said gross margins will be 61 percent to 62 percent. He said he sees per-share earnings to come in between 50 cents and 52 cents versus a consensus view of 51 cents.

Cisco shares are rising in after-hours trading. They’re at $22.04, up nearly 4 percent, having closed at $21.21 during the regular session.

Here’s Cisco’s original announcement.

Cisco Reports Third Quarter Earnings
SAN JOSE, CA — May 15, 2013 – Cisco (NASDAQ: CSCO)

Q3 Net Sales: $12.2 billion (increase of 5% year over year)
Q3 Earnings per Share: $0.46 GAAP; $0.51 non-GAAP

Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its third quarter results for the period ended April 27, 2013. Cisco reported third quarter net sales of $12.2 billion, net income on a generally accepted accounting principles (GAAP) basis of $2.5 billion or $0.46 per share, and non-GAAP net income of $2.7 billion or $0.51 per share.

“Cisco is executing at a very high level in a slow, but steady economic environment. We are especially pleased with our ninth consecutive record revenue quarter. We are starting to see some good signs in the US and other parts of the world which are encouraging,” stated Cisco Chairman and CEO John Chambers. “We have the right products, the right solutions and our customers are coming to us to solve their biggest business problems. The pace of change is increasing and Cisco is well positioned.”

Chambers continued, “We have always believed that the Internet will revolutionize the way we work, live, play, and learn. This has never been truer than it is today, with cloud, mobility and video all coming together to deliver the Internet of Everything and unprecedented new opportunities for businesses and consumers. We’re excited about the future.”

GAAP Results

Q3 2013 Q3 2012 Vs. Q3 2012
Net Sales $ 12.2 billion $ 11.6 billion 5.4 %
Net Income $ 2.5 billion $ 2.2 billion 14.5 %
Earnings per Share $ 0.46 $ 0.40 15.0 %

Non-GAAP Results

Q3 2013 Q3 2012 Vs. Q3 2012
Net Income $ 2.7 billion $ 2.6 billion 4.7 %
Earnings per Share $ 0.51 $ 0.48 6.3 %

Net sales for the first nine months of fiscal 2013 were $36.2 billion, compared with $34.4 billion for the first nine months of fiscal 2012. Net income for the first nine months of fiscal 2013, on a GAAP basis, was $7.7 billion or $1.44 per share, compared with $6.1 billion or $1.13 per share for the first nine months of fiscal 2012. Non-GAAP net income for the first nine months of fiscal 2013 was $8.0 billion or $1.50 per share, compared with $7.5 billion or $1.38 per share for the first nine months of fiscal 2012.

A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in the table on page 6.

Cisco will discuss third quarter results and business outlook on a conference call and webcast at 1:30 p.m. Pacific Time today. Call information and related charts are available at http://investor.cisco.com.

Cash and Cash Equivalents and Investments

Cash flows from operations were $3.1 billion for the third quarter of fiscal 2013, compared with $3.3 billion for the second quarter of fiscal 2013, and compared with $3.0 billion for the third quarter of fiscal 2012.

Cash and cash equivalents and investments were $47.4 billion at the end of the third quarter of fiscal 2013, compared with $46.4 billion at the end of the second quarter of fiscal 2013, and compared with $48.7 billion at the end of fiscal 2012.

Dividends and Stock Repurchase Program

During the third quarter of fiscal 2013:

The combination of cash used for dividends and common stock repurchases under the stock repurchase program totaled approximately $1.8 billion.

Cisco paid a cash dividend of $0.17 per common share, or $905 million.

Cisco repurchased approximately 41 million shares of common stock under the stock repurchase program at an average price of $20.85 per share for an aggregate purchase price of $860 million. As of April 27, 2013, Cisco had repurchased and retired 3.8 billion shares of Cisco common stock at an average price of $20.35 per share for an aggregate purchase price of approximately $77.7 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $4.3 billion with no termination date.

“We executed as we said we would, achieving our revenue and profitability objectives,” stated Frank Calderoni, executive vice president and chief financial officer. “We are moving the business forward by executing on our strategy of driving long-term value to our shareholders.”

Select Global Business Highlights

Cisco completed the acquisition of privately held Intucell, Ltd., a provider of advanced self-optimizing network (SON) software solutions that enable mobile carriers to plan, configure, manage, optimize, and heal cellular networks automatically, according to changing network demands.
Cisco announced and completed the acquisition of Cognitive Security, a privately-held company headquartered in Prague, Czech Republic. Cognitive Security’s solution integrates a range of sophisticated software technologies to identify and analyze key IT security threats through advanced behavioral analysis of real-time data.
Cisco announced its intent to acquire SolveDirect, a privately held company headquartered in Vienna, Austria that provides innovative, cloud-delivered services management integration software and services.
Cisco announced its intent to acquire privately held Ubiquisys, a leading provider of intelligent 3G and long-term evolution (LTE) small-cell technologies that provide seamless connectivity across mobile heterogeneous networks for service providers.

Cisco Innovation

Cisco unveiled its new IP Interoperability and Collaboration System (IPICS) solution, a new set of multivendor, interoperable communications capabilities for operations and dispatch centers across government and enterprise industries.
Cisco announced its Cisco Integrated Services Router with Application Experience (ISR-AX), which converges routing, security technologies and a comprehensive suite of application-level services into a single-box solution designed to deliver the essential services needed at branch offices.
Cisco introduced its next-generation 100 Gigabit CMOS-based transceiver, Cisco CPAK™, the industry’s most compact and power-efficient 100 Gps transceiver technology, designed to reduce space and power requirements by more than 70 percent compared with alternative transceiver form factors, such as CFP.
Cisco introduced product innovations for data center and cloud environments including the following: highest-density 40-gigabit Layer 2/3 fixed switch; simplest hybrid cloud solution; and expansion of the Cisco® Open Network Environment with the most extensible controller.
Cisco announced new Cisco Unified Access™ solutions that simplify network design by converging wired and wireless networks.

Select Customer Announcements

Vodafone Netherlands, the second largest telecom service provider in the Netherlands, deployed the Broadband Network Gateway (BNG) Service Manager — enabling it to increase scalability and service velocity for its enterprise customers.
Cisco announced that MetroPCS Communications began a commercial launch of its Cisco Carrier-Grade Internet Protocol Version 6 Solution as a first step in the transition of its mobile Internet network to Internet Protocol version 6 (IPv6).
Cisco announced that GET, a leading cable operator in Norway, selected the Cisco Videoscape™ Unity video services delivery platform to transform its TV service and enable the deployment of next-generation entertainment experiences, including personalized and synchronized TV across multiple devices.
Cisco announced that SFR, a leading mobile telecommunications provider in France, selected Cisco to expand and enhance its mobile Internet network in order to accelerate the deployment of advanced 4G LTE services to its customers.
Cisco announced that Turkcell, the leading communications and technology company in Turkey with more than 35 million subscribers, has deployed the Cisco ASR 5000 Series as the foundation for its advanced mobile Internet network.

Analysts are expecting per-share earnings of 49 cents on sales of $12.2 billion. They’re also expecting Cisco to guide to 51 cents on $12.5 billion in the current quarter.

In a note to clients Monday, UBS analyst Amit Passi reiterated a “buy” rating, saying that checks with CIOs and resellers showed that Cisco might hang in there. “We think Cisco can meet or exceed consensus earnings estimates driven by improving business mix and efficiencies on the cost side,” he wrote. “Cisco’s diversified portfolio across end markets, customer types, and technologies should allow it to better weather the current storm of weak customer spending than some of its competitors.”

Even so, he’s cautious on the quarter ending in July. “We remain somewhat cautious heading into earnings this quarter in light of weaker spending trends across enterprise software, telecommunications and government customers, and recent negative data points in wireless [networks] during the month of April.”

The U.K.’s Telegraph has a story today on a report in a British academic journal, arguing that the Stuxnet malware used to attack and sabotage Iranian nuclear enrichment sites in 2010 may have had the net effect of helping Iran get better at enriching uranium.

Stuxnet, you’ll recall, is the most famous of a series of cyber weapons said to have been used by the U.S. and Israel in a series of joint operations meant to sabotage and delay the ability of Iranian nuclear scientists to enrich uranium and eventually build a nuclear bomb.

Never officially acknowledged by either the U.S. or Israel, the Stuxnet source code was taken apart by computer-security researchers who determined that only a motivated government could have the resources to build it. And the only motivated governments in the world with sufficient know-how are the U.S. and Israel, their argument went. The New York Times finally all but proved them right.

Using data gathered from the International Atomic Energy Agency, King’s College researcher Ivanka Barzashka concluded that the Stuxnet attacks exposed weaknesses in Iranian systems that would otherwise have gone undetected, and which have since been patched. Since then, she said, Iran has regrouped and actually boosted its capacity to enrich uranium.

The story goes that the Stuxnet worm was introduced in 2009 via a series of USB drives dropped by intelligence operatives near a targeted facility at Natanz. The worm penetrated computers running pretty much any variant of Microsoft’s Windows, looking for a specific set of machines hooked up to a series of Siemens programmable logic controllers — computers that sit between desktop PCs and industrial equipment like, say, nuclear centrifuges.

What it did was show operators a screen depicting centrifuges running normally, while at the same time issuing commands to those centrifuges to spin too fast. Ultimately, several of them exploded. The estimate at the time was that Iran’s nuclear efforts had been set back by two years. It has now been four years since that attack was alleged to have taken place. If Barzashka’s findings are confirmed — and that’s admittedly not going to be easy — it would raise some serious questions about whether or not the Stuxnet attacks were such a good idea in the first place.

The company announced a short while ago that it had landed a $45 million Series E round of financing led by Janus Capital; the Hillman Company, the investment firm run by Pittsburgh billionaire Henry Hillman; and a third party that was not named. Existing investors Andreessen Horowitz, Greylock Partners, Madrona Venture Group and Shasta Ventures also participated, as did a few accounts managed by investment firm T. Rowe Price. Cisco Systems is also an investor.

The round brings Apptio’s total capital raised to $136 million. Its last reported implied valuation was about $600 million. CEO Sunny Gupta wouldn’t tell me the new valuation, but said it was a “considerable improvement.” You can probably do the math yourself.

When I last checked in with Gupta in mid-2011, Apptio, which is based outside Seattle in Bellevue, Wash., had 60 customers, including Facebook, and was managing about $50 billion in tech investments. Now it has 125 customers, including Boeing, Target and Xerox.

Managing IT costs and investments is all Apptio does. Gupta is a former partner exec with Opsware, the company that venture capitalists Marc Andreessen and Ben Horowitz famously sold to Hewlett-Packard.

He spotted a shift in priorities: CIOs were increasingly focused not on managing technology, but on getting the best bang out of that technology for the dollar, and on keeping costs as low as possible.

Taking a round from institutional investors like Janus is usually a sign that an IPO is coming next. That’s the trajectory that both Facebook and Workday followed. Gupta was a little evasive when I asked him about his IPO plans. There’s nothing imminent, but he didn’t say anything to imply that we shouldn’t be watching for an S-1 filing within the next year or so. I certainly will be.

This would be the second time in as many weeks that Syria’s Internet connections have been cut off, and the fourth time in recent memory. The last time was May 7, and the first time was last November.

According to Syrian Digital Reports, the outage began at about 10 am local time.

#Syriablackout #Syria went offline for the second time in one week. The blackout began at 10:00 am local time according to @SecDev.

May 15, 2013 6:16 am via FacebookReplyRetweetFavorite

@DSRSyria

SyriaDigitalReports

Google’s Transparency Report has confirmed the outage, as has Arbor Networks, which has also monitored the sudden stoppage of traffic.

Here’s a screen grab of Google’s graph of the outage:

And here’s a traffic graph from Arbor Networks:

Remember that all four Internet connections that come into Syria are routed through a single building in Damascus, the Syrian Telecommunications Establishment. So the act of withdrawing its network from the global routing tables can only be done in one place. Certain routers are temporarily reconfigured so as to stop announcing themselves to the rest of the world.

Last week’s outage lasted the better part of two days, and there are tentative signs that a few people knew that it was coming and may have tweeted about it.

Update: That was a short outage. Syrian Digital Reports says service is coming back now.

Internet has returned in #Syria after an 8 hour outage across all BGP routes #Syriablackout #OpSyria #Damascus #Aleppo

May 15, 2013 8:49 am via TweetDeckReplyRetweetFavorite

@DSRSyria

SyriaDigitalReports

Now the New Yorker magazine says it can help journalists, and their sources, cover their tracks. It is rolling out an electronic tip box it says will give leakers and tipsters the ability to cloak their identity when they reach out to the magazine.

And it’s releasing the software that built the box, created by the late Web activist Aaron Swartz, via an open-source license. Which means that it expects and encourages other news organizations to build their own versions.

You can find detailed information about the New Yorker’s Strongbox here, along with posts from Joshua Rothman, the magazine’s archive editor, and Kevin Poulsen, the investigations editor at Wired, which, like the New Yorker, is published by Conde Nast. Poulsen’s post, which explains how he and Swartz collaborated to create Strongbox, makes for particularly good reading.

Strongbox isn’t the first attempt to create a secure tipbox in recent years. In 2011, following WikiLeaks’ rise to prominence, The Wall Street Journal launched SafeHouse, a similar project. But the security experts quickly pointed out flaws in the Journal’s technology, and if the paper has gotten much use out of it since then, they’re not saying (the Journal, like this website, is owned by News Corp.).

I have zero ability to judge the relative security of the New Yorker’s box, but I’m sure that Swartz’s connection to the project will reassure lots of people. (For the record, both the Journal and the New Yorker’s boxes use Tor, an anonymizing Web tool/network.)

I can try to explain the basic principle behind the box, though: It’s supposed to allow anyone to submit a letter, document or any thing else, while keeping their identity secret. If a New Yorker staffer wants to try to contact the tipster, they can reach out through an electronic version of a dead drop, which gives the original tipster the ability to re-contact the magazine.

The New Yorker had planned on introducing Strongbox last month, but delayed it for technical tweaks. But the last week’s revelations about the federal government’s surveillance of the Associated Press helps illustrate the need for the tech, said Poulsen.

“We see governments around the world putting a lot of resources into tracking journalistic sources,” he said. “So far, technology has been an ally not of journalists but the government.”

Airware, a startup that is creating a software platform for commercial drones, said it had raised $10.7 million in a Series A funding round led by Andreessen Horowitz. Google Ventures also participated. As part of the deal, Andreessen Horowitz partner Chris Dixon will join Airware’s board.

The Newport Beach, Calif., company said it would use the money to expand staff for its universal development platform as the market for non-military drones expands.

Airware founder and CEO Jonathan Downey said that uses of drones will be increasing for a wide range of purposes, from checking infrastructure to monitoring mining operations to preventing poaching.

In an interview, Downey said that he expects to compete with a range of ex-military efforts, but that the most successful companies will be those that provide a platform to allow for the widest range of innovations.

“This is going to be about a lot more than we know or can guess,” he said. “The industry is at its very beginnings.”

Dixon agrees. “Hardware is the new software,” he said about the investment in Airware, which he said he discovered after attending conferences about the fast-moving drones business, noting that the overall field of robotics has “overpromised and underdelivered.”

Airware came out of both the Lemnos Labs and Y Combinator incubators and had raised seed financing from First Round Capital, Firelake Capital, RRE Ventures, Shasta Ventures, Promus Ventures and several Y Combinator partners.

Dell is expected to report revenue of roughly $14 billion, and earnings, excluding some expenses, of 20 cents a share for the company’s just ended fiscal first quarter, according to the person briefed on the financial results.

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At its SuiteWorld conference in San Jose, Calif., today, CEO Zach Nelson announced that cookware retailer Williams-Sonoma had picked NetSuite’s SuiteCommerce product as the backbone of its expansion into Australia.

If you think back, it was a year ago tomorrow that NetSuite moved into what it called at the time commerce-as-a-service, adding another option to the blank-as-a-service meme that tends to crop up in discussions around companies that offer pretty much anything via cloud infrastructure.

Nelson told me that Williams-Sonoma was able to roll the entire service out to four brands in three months. “It’s a very important win for us,” he said.

The point of SuiteCommerce is to create a seamless experience for customers, whether they’re buying something online or on the Web. As customers have essentially come to expect to be able to buy anything and everything online, the traditional back-end commerce engines like Microsoft’s Dynamics, Sage and others have tended to be imperfectly combined with patchwork products for selling on the Web.

The combination has never been ideal. Customer-facing bits have rarely if ever been unified with the ones that also face suppliers. That has a way of complicating things like managing inventory and supply chains. And things are getting even more complicated as machines are programmed to automatically buy things from other machines based on a predefined set of circumstances.

NetSuite built SuiteCommerce to speak directly to the core enterprise resource planning (ERP) and customer relationship management (CRM) functions that are already its bread and butter. In English, that means that the new engine comes into the process already knowing everything it needs to know about the business.

Separately NetSuite announced a partnership with AutoDesk, the design software company, that it says will speed up the process of designing and manufacturing a product, and also help take costs out along the way.

It’s also worth noting that NetSuite shares are trading at their highest levels ever today. They’re up 2.5 percent to $94.42.

I’ll have more in a minute, but for now here’s the list of names, as taken from the letter just made public in a filing with the U.S. Securities and Exchange Commission. Icahn and Southeastern appear to have nominated six directors each.

On May 13, 2013, Longleaf Partners Fund delivered a letter to the Issuer notifying the Issuer that it intends to nominate the following six persons (the “Southeastern Nominees) as nominees to the Board of Directors of the Issuer at the Issuer’s 2013 Annual Meeting of Stockholders or any other meeting at which Directors may be elected:

Matthew C. Jones
Bernard Lanigan, Jr.
Rahul N. Merchant
Peter van Oppen
Howard Silver
David A. Willmott

In addition, the Icahn Parties (as defined herein) have informed Southeastern that the Icahn Parties intend to submit a notice to the Issuer on May 13, 2013 to nominate the following six persons (the “Icahn Nominees”) as nominees to the Board of Directors of the Issuer at the Issuer’s 2013 Annual Meeting of Stockholders or any other meeting at which Directors may be elected:

Carl C. Icahn
Harry Debes
Dr. Rajendra Singh
Gary Meyers
Daniel Ninivaggi
Jonathan Christodoro

Update: Here’s some very brief biographical information on who the are:

Lanigan is the Chairman, CEO and co-founder of Southeastern Management.

Merchant was last year named the first Chief Information Officer of New York City. He’s also a former CIO at Fannie Mae.

Van Oppen is a partner in Trilogy Equity Partners, a Bellevue, Wash.-based VC firm founded by former T-Mobile USA CEO Peter Stanton that specializes in wireless investments. He’s also a former CEO of Advanced Digital Information Corp., a storage company.

Silver is the former President and CEO of hotel chain Hampton Inn Equity Inns, a hotel chain that was sold to an investment fund in 2007.

Willmott is President and COO of Blount International, a manufacturer of farm and agricultural equipment based in Portland, Ore.

Carl Icahn: Activist investor, head of the Icahn Enterprises.

Debes is the former CEO of Lawson Software, now a unit of Infor.

Meyers is the CEO of a software company called FusionOps, and the former CEO of Synplicity, a company that makes software to design a type of chip known as a field programmable gate array. It’s now a part of Synopsys.

Ninivaggi is the president and CEO of Icahn Enterprises.

Christodoro is a managing director at Icahn Enterprises.

Jones is the CEO of EOS Climate, a technology and service company specializes in the management and destruction of refrigerants. Before that he was CEO of CloudShield, a cyber security outfit.

Update: I added bio information for Jones and made some corrections to the information about Silver. I also added a little more info on Merchant.

In that capacity, I learned to use the Bloomberg terminal that sits on some 315,000 desks in the financial industry and that makes the company all its money. And I learned early on that practically every move terminal users make is tracked and recorded. (Also, it goes without saying but I’ll say it anyway, this website is owned by News Corp., which owns Dow Jones, which is a competitor to Bloomberg.)

In a Sunday editorial on Bloomberg View, the company’s equivalent of an Op/Ed page, Editor-in-Chief Matt Winkler wrote, “Our reporters should not have access to any data considered proprietary. I am sorry they did. The error is inexcusable.” He opens the piece by quoting from a section of his book, “The Bloomberg Way”:

“The appearance of impropriety can be as damaging to a reputation as doing something improper. Because we hold others accountable for disclosure, we expect the same of ourselves. While disclosing errors of judgment may be embarrassing, the sooner the lapses are reported, the sooner there is nothing more to say.”

This raises the question: How fully will Bloomberg News disclose what it admits to be an “error of judgment” that is “almost as old as Bloomberg News.” How many reporters used the Z function — a software command that displays whether or not a customer is logged in and which functions he or she has been using the most — over the many years it was available to them? Chances are that Bloomberg has the data on precisely how often it was used and by which reporters. It could with some effort call in a third party to perform a detailed audit on this, and then disclose the findings of that audit to clients and the rest of the world.

I’ve asked Bloomberg about this. Spokeswoman Lauren Meller didn’t have an immediate answer. If I get one I’ll post it here.

If you’re going to properly understand the controversy that has emerged about the company in recent days, you need to understand the basics of the terminal itself. Bloomberg is at its very heart a financial data software company. In executing a “function” on its terminals, which are seen as status symbols of the financial industry, you type a command, usually one to four letters, and hit the Go key, which replaces the Return key on the conventional keyboard. When looking up, say, the price and fundamentals of Apple shares, you type AAPL, hit a key labeled Equity to indicate the first four letters are intended to indicate a stock ticker symbol, and then hit Go.

During the year I worked there I never heard about the so-called “Z function” at the heart of the current controversy, but its existence isn’t surprising. If you haven’t been paying attention, here’s what it’s all about. All 2,000-odd reporters at Bloomberg News have these terminals on their desks and use them to conduct research, report, write and publish their stories, and to communicate within the organization and without.

The Z function, now disabled for newsroom employees, showed when clients were and were not logged in to the system. When someone hadn’t logged in in a while, an attentive reporter might see that as a tip that the person was changing jobs or had left a firm, and then the reporter would start asking questions. Stories about executives moving between firms tend to be popular among terminal clients. It also showed what other Bloomberg functions these clients had been using, but in a non-specific way that wouldn’t show what stock or bond or other matter they might be researching or which news stories they had been reading. Bloomberg reporters are also said to have had access to transcripts of customer service calls clients made seeking help with functions.

Bloomberg is and has always been a “big data” company. The newly fashionable idea that you can learn a great deal and thus improve a software application by analyzing the big mass of data gathered about how it is used and where users run into problems has been been at the core of Bloomberg’s operational philosophy from the beginning.

Employees know from the moment they join the company that the amount of time they spend at their desks is logged. Building security systems are linked to the terminal and an access badge. When you “badge in” at any Bloomberg office around the world, this occurrence is logged. If you’re a Bloomberg employee based in New York and happen to be visiting London or Tokyo, your arrival and departure times are tracked, as is the amount of time your terminal is idle, should you be out gathering news or taking a lunch break.

I never experienced this first hand, but I heard privately shared tales from colleagues about their annual performance reviews, and discussions would at times turn to how well they used the terminal to do their jobs. As I was first joining, a friend who had worked at Bloomberg for a while told me that during one such conversation, he was mildly scolded for using Yahoo Finance to look up some bit of financial data — terminals also have Web browsers — rather than the terminal itself.

I point out this conversation for a reason. In its quest to make its products better — certainly a logical goal — Bloomberg clearly tracks how often its clients use its many functions. If that’s true, then it logically follows that it tracks how its reporters do the same thing. Historical data on the use by reporters of the Z function exists and can be examined.

As an organization, Bloomberg News is journalism as re-imagined by Fredrick Winslow Taylor, the philosophical father of factory automation. Its reporters are routinely gauged on how often they log scoops that appear on the terminal’s news service. Taylor believed that by analyzing work, the “One Best Way” to get it done could be found. As the founding editor of Bloomberg News, Winkler always struck me as an avid student of “Taylorism.” Every bit of data that can be gathered is analyzed to make the news gathering process better and more efficient. Indeed, Winkler’s 360-page book seems almost Taylor-inspired.

Scoops and other distinctive stories are further categorized into a taxonomy using an internal nomenclature, and the best of those are singled out in what’s known as “Matt’s Note,” a weekly memo from Winkler. An MMWin, or a market-moving win, is a story that beats a similar story by a competitor by several minutes and that after publication causes the market to react in some way. A Follow is when a competitor writes a story that follows up on a Bloomberg scoop. And there are many others.

All of these are thought to be tracked and used to evaluate a reporter’s performance every year. That means there’s data on how many reporters used the Z function and about whom, and probably data as well correlating to the published stories that resulted.

With at least two large banks complaining, and now two government entities — the Federal Reserve in the U.S. and the European Central Bank — asking questions about all this, you can expect concerns about the lines between Bloomberg’s business and news operations to persist.

The Times report quotes SAP co-CEO Bill McDermott as saying that HP had asked if SAP might be interested in buying Autonomy. The story isn’t clear on when the conversation between HP CEO Meg Whitman and McDermott took place, other than to say it was before Whitman visited London last month and said that Autonomy was not for sale.

I just got this statement from HP on the matter:

“Contrary to reports in the media, HP has no interest is selling Autonomy. During the past year, we’ve received inquiries from SAP about purchasing HP software assets, and time and again we’ve said ‘no.’ We believe Autonomy will play an important role in HP’s long-term strategy.”

I also reached out to SAP spokesman Jim Dever, who tried to walk back what the Times reported based on what he says McDermott actually said in the interview with reporter Nic Fildes:

“If you look at the quote, Bill doesn’t say anything other than we were aware when Autonomy was on the market. I was part of the conversation, and he never mentioned discussions with HP. In fact, he never said we were approached by HP.”

Sources familiar with the conversations tell me that since HP is such a big SAP customer — something its operational head John Hinshaw mentioned in a recent interview with AllThingsD — Whitman and other HP execs routinely meet with McDermott and his co-CEO, Jim Hagemann Snabe, CTO Vishal Sikka. She’s also met with founder Hasso Plattner, where they also discussed, among other things, HP’s naming rights to the HP Pavilion, home of the National Hockey League’s San Jose Sharks.

These sources tell me that the conversations on the topic of Autonomy potentially changing owners, if you could even call them conversations, were so informal as to be almost meaningless. “Autonomy was never shopped to SAP,” one source told me emphatically.

It’s not the first time chatter has emerged about potential buyers interested in taking Autonomy off HP’s hands. In January, there were reports that HP was getting “expressions of interest,” but HP quickly slapped them down.

And there is indeed a school of thought that Autonomy would have a more natural home within SAP. Former HP CEO Léo Apotheker had previously been a co-CEO at SAP, and before he was fired had steered HP toward becoming more of a software company. If SAP is trying to engage HP on the subject of selling Autonomy, it may be because it simply doesn’t like the idea of HP being in the software business.

HP is still a relatively new player in software, which accounted for a little more than $4 billion in sales last year, or 3.3 percent of HP’s total revenue of $120.4 billion. Small, but growing enough to constitute being considered a rare bright spot at HP. HP’s sales grew 43 percent from 2010 to 2012, though that includes the addition of the Autonomy business.

Update: After further reporting, I’ve updated the story above to reflect which SAP executives Whitman has met with. It turns out she hasn’t met with Jim Hagemann Snabe after all.

A wide range of companies — from Cisco rival Juniper Networks Inc. to tech juggernaut International Business Machines Corp. — have caught investors off guard in recent weeks as corporate belt-tightening saps their growth.

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The company is betting that a thoroughly modernized approach to IT — consciously modeled in many ways on advances made by Google Inc. and Facebook Inc. — will help accelerate the turnaround led by chief executive Dan Akerson. The company’s new data center has been designed to be easier to maintain and expand, and less expensive to cool than older, conventional data centers. It also supports a mixture of conventional and experimental technologies that the company hopes will measurably improve its capacity to innovate by doubling the number of IT projects it is able to undertake. But those capabilities will not transform the company unless the rest of the company undergoes an accompanying cultural shift, one that Mr. Mott says has “just begun.”

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Icahn on Friday unveiled a joint proposal with Southeastern Management, Dell’s largest outside shareholder, that would give Dell shareholders the option to continue holding shares in the company, and take an additional $12 a share in cash or stock. The offer came as an alternative to a $24.4 billion leveraged buyout proposed by Dell founder and CEO Michael Dell and the private equity fund Silver Lake Partners.

The board’s special committee asked Icahn and Southeastern to spell out specifics of its plans for Dell, and questioned whether or not the proposal was a serious one.

“It is not clear to us whether you intend to formulate your transaction as an actual acquisition proposal that the Board could evaluate and potentially endorse or accept or rather to propose it as an alternative that the Board could consider in the event the pending sale to Silver Lake and Michael Dell is not approved,” the committee said in its letter, which you can read in full below.

In the letter, Dell’s committee also asked Icahn and Southeastern to spell out financing terms — the plan calls for taking on a lot of debt — and how it would provide cash to keep the company running after using up much of Dell’s pile of cash to pay shareholders.

Icahn owns a stake in Dell that amounts to about 4.5 percent of shares outstanding, and Southeastern owns about 8 percent. They’ve both been pretty critical of the Dell-Silver Lake proposal. In televised comments on CNBC Friday, Icahn said that Dell’s existing shareholders will “literally get screwed” by the deal, which values Dell at $13.65 a share. Southeastern has previously described the Dell-Silver Lake buyout plan as “inadequate.”

The other shoe expected to drop today on the Dell front will also come from the Icahn camp. Icahn said he plans to nominate a new slate of Dell directors, and that the list would be made public today. It will be interesting to see whose names are on it.

Dell shares were indicating they would open lower this morning in premarket trading. As of 8:23 am ET, Dell was trading down four cents from Friday’s close, to $13.41.

Anyway, here’s the latest letter:

May 13, 2013
Mr. Carl C. Icahn
Icahn Enterprises L.P.
767 Fifth Avenue, 47th Floor
New York, NY 10153

Mr. G. Staley Cates
Southeastern Asset Management Inc.
6410 Poplar Avenue, Suite 900
Memphis, TN 38119
Icahn/Southeastern Proposal

Dear Mr. Icahn and Mr. Cates:

We have received your letter dated May 9, 2013, addressed to the Board of Directors of Dell Inc. (“Dell” or the “Company”), in which you outline a potential transaction in which the Company’s stockholders would be entitled to elect to receive either $12.00 per share in cash or $12.00 in additional shares (based on a value your letter assumes to be $1.65 per share) for each share currently held, in addition to retaining their current shares.

It is not clear to us whether you intend to formulate your transaction as an actual acquisition proposal that the Board could evaluate and potentially endorse or accept or rather to propose it as an alternative that the Board could consider in the event the pending sale to Silver Lake and Michael Dell is not approved. In order for the Special Committee of the Board of Directors of Dell to evaluate the transaction you have proposed and potentially negotiate terms which could cause it to constitute a Superior Proposal within the meaning of the pending Merger Agreement, we would need certain clarifications and additional materials, as set forth below.

Please provide a draft of the definitive agreement pursuant to which the transaction would be effected. The Special Committee needs to understand the full terms and structure of the transaction, the extent to which it would be conditioned upon future events and actions, and the remedies that would be available to the Company and its stockholders if the transaction is not consummated.

Please provide comprehensive information regarding the proposed financing for the transaction. We need to understand the terms of the debt financing, and contingencies available if cash on hand or stockholder rollovers are less than anticipated. We would also need to see drafts of forms of commitment papers (and any proposed bridge facility) so that we can assess the certainty of closing.

Please indicate the counterparty and terms of the proposed receivables sale or financing and provide a draft of form of commitment letter or purchase agreement applicable to this proposed sale or financing.

Please describe any contemplated arrangements to provide working capital or other liquidity following the closing. Your proposal does not appear to take into account the additional borrowings that would seem to be required to address the liquidity needs that would result from the extent to which you would use the Company’s cash in the transaction and the fact that you would sell accounts receivable, which would have the effect of reducing future cash flows. In addition to working capital, the Company is likely to have other significant cash needs, such as approximately $1.7 billion of debt maturities within approximately 12 months after closing.

Your proposal assumes that holders of at least 20 percent of Dell’s shares will elect to receive distributions in the form of additional Dell shares. Please provide the forms of commitment letters pursuant to which your affiliated entities would commit to elect to receive additional shares. In addition, please indicate whether you would obtain similar commitments from holders representing an additional 8 percent of Dell’s shares (we note, based on your Schedule 13D filings, that your affiliated entities have investment discretion over approximately 12 percent of Dell’s outstanding shares). If you would not obtain such commitments, please indicate as noted above, the source of the additional cash needed to fund cash distributions in respect of these shares.

Please provide your analysis as to whether the receipt of additional shares by stockholders electing to receive share distributions will be taxable to those stockholders.

Please identify the persons you would expect to form the senior management team of Dell following the transaction, and what role these persons would play in arranging the financing for the proposed transaction. Also, please provide us with a description of the strategy and operating plan you would expect this management team to implement. This information is important both to our assessment of the value of the proposed equity stub and to an evaluation of the financing and completion risk for a highly leveraged transaction of the kind you propose.

Please provide the form of any shareholder agreement, or any pertinent term sheet, governing the relationship between the Icahn and Southeastern affiliated entities so the Special Committee can better understand how decisions relating to the transaction and the Company would be made following the signing of a definitive agreement and following closing of the transaction.

If you have questions about the requested information, please contact Roger Altman, Will Hiltz or Naveen Nataraj at Evercore Partners.

Very truly yours,

The Special Committee
of the Board of Directors
of Dell Inc.