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 company announced today that Prashant Gandhi, a senior director at Cisco who led development of its own SDN efforts, will join Big Switch as vice president of product management, starting today.

It’s an important hire for Big Switch because there are few people who have as much history in the world of traditional enterprise networking who also have as much history working on efforts to remake it with software. Gandhi worked on some of Cisco’s most important mainstream switching products, like the Cisco Nexus 7000. But he also worked on Cisco’s Nexus 1000v virtual switch and its Cisco One software controller.

His move is occurring at a crucial moment. In recent weeks Cisco has been talking a lot about its interest in contributing to the OpenDaylight project, an open-source SDN consortium. Cisco has contributed code from the CiscoOne product to the project, and Gandhi would have been intimately familiar with the substance of its effort. BigSwitch is a member of OpenDaylight, too.

Big Switch, on the other hand, hails directly out of OpenFlow, another open-source networking project that was born at Stanford University.

I talked with Jason Matlof, Big Switch’s marketing VP, who described Gandhi’s move as a big vote in favor of Big Switch’s approach over Cisco’s. “No one is better qualified to make a judgement on Cisco’s contribution to OpenDaylight versus ours. He has worked on Cisco’s contribution and he is voting with his feet to come to Big Switch.”

Big Switch, you’ll recall, came out of stealth mode last year, backed by $37 million in combined funding from investors including Redpoint Ventures, Khosla Ventures, Index Ventures and Goldman Sachs. Its plan is basically to turn networks into a software platform around which companies can build their own applications.

And yes, SDN technology is still new, and most of the battles now are about building foundations for future business that lie years down the road. Indeed, companies like Cisco, Hewlett-Packard and Juniper still sell a great deal of old-school non-SDN networking gear, though HP in particular has been going to a lot of trouble to call attention to its shift in favor of SDN-ready gear.

Gandhi is a Cisco veteran, having joined that company first in 1999 in a technical marketing role that lasted six years. He then went on to start Rohati Networks, which Cisco snapped up during an acquisition spurt in 2009.

Big Switch didn’t make Gandhi available for an interview, but in a statement announcing his hiring, he alluded to Rohati and called Big Switch a “unique opportunity:”

“Since the successful completion of the integration of Rohati technologies within Cisco’s Data Center Group, I have been searching for a unique opportunity in the rapidly forming software-defined networking market. … Big Switch Networks is the leader in SDN with the best team, the best technology and the best customer traction, so the choice was clear. Customers are very eager to bring commercial-grade SDN solutions into their networks, and I look forward to helping this market move quickly to maturity.”

Hewlett-Packard made a big move in that direction today, announcing a series of switches that support OpenFlow, open source software that makes routers and switches programmable and thus a lot more flexible.

The news gave me an opportunity to catch up with Bethany Mayer, HP’s senior vice president and general manager for networking. We talked about HP’s plans around SDN:

AllThingsD: Bethany, put simply, what is SDN all about, as HP sees it?

Mayer: The idea is that we’re trying to create more automation, less constraint, and have the network be more abstracted so that there are few manual processes in the data center. It’s meant to bring more simplification and flexibility to the data center. In all of these products we have enabled OpenFlow. We now have 40 platforms that are OpenFlow-enabled. And we have about 20 million ports out there in the marketplace today that are OpenFlow-ready.

How is the state of HP’s networking business, generally?

Backward-looking, we now have 13 quarters of year-over-year growth under our belt. So we’ve continued to grow the business. Our SDN strategy is getting a lot of interest in the industry. I just recently spoke at the Open Networking Summit. The amount of interest has been very high. We had about 60 customers in our SDN beta, and they’re really excited about the applications we’ve created. No one else has created a security application, a load-balancing application, so things have been very good.

And how do you see the competitive landscape? HP is a distant No. 2, but a solid N0. 2 to Cisco Systems. Do you see yourself taking business away from Cisco, or is it more complicated than that?

We’ve continued to take market share in the industry over the last several quarters, and we’ve also maintained our No. 1 position as an enterprise networking vendor in China.

And HP tends to play mostly in the enterprise networking space, but you don’t play in the carrier-class and telecom networking market where Cisco tends to dominate, correct?

That’s correct, however I would say that with this virtual services router that we just announced, that offers us some inroads in the service provider market, because there are new capabilities they are looking for, something called network services virtualization, where they are trying to virtualize functions like routing and switching, security and load balancing. The capabilities that we’re bringing to the table with this announcement makes them very interested. This allows them the ability to move toward virtualizing their networks, and avoid the amounts of money they pay for their expensive proprietary switches and routers. Our focus for disrupting the networking industry is via open standards and simplification. That’s generating strong interest from the service providers. They don’t want to spend the money on the more expensive switches and routers. The point is to help these customers break the proprietary lock, help them make their networks more agile, and meet the new needs of their networks.

The company said today that it has closed a $17.1 million round of funding from its existing syndicate of investors, plus a new lead investor, Triangle Peak Partners. The round brings its total capital to $116 million raised since 2005.

It’s Vidyo’s fifth round of funding, the last being a $22 million series D led by QuestMark Partners. Networking company Juniper Networks later joined that with an undisclosed amount at the time, though a little back-of-the-envelope math suggests it was between $12 million and $14 million.

Previous investors include Menlo Ventures, Rho Ventures, Sevin Rosen Funds, Saints and Four Rivers Group.

In a statement announcing the funding, Vidyo said it saw billings increase by 68 percent year over year. This included a 77 percent surge in its health care business, and 67 percent growth in large enterprises. Since it’s private, it doesn’t disclose revenue.

Vidyo’s secret sauce is a technology called Adaptive Video Layering. Its hardware sits in a rack in the customer’s data center and constantly watches the underlying network conditions, and then adapts to meet them while video calls are under way. If there’s a lot of interference, the Vidyo system throttles up and down on the picture and sound it’s trying to deliver, based on the condition of the network. But it also adapts dynamically to the device that’s being used: It supports Apple’s iOS devices and also Google Android devices. It’s also the technology behind Google Hangout.

First reported by ReadWrite, the deal will bring Mashery’s 125 employees into Intel’s services division. APIs are the keys to working with different cloud services and software. For developers, access to an API is usually the first step to building enhancements and ancillary services and features, or getting two services working together.

Mashery had raised more than $34 million, according to Crunchbase, the most recent of which was a $12 million venture round led by OpenView Ventures and Cisco Systems. Prior investors include First Round Capital and Formative Ventures. Financial terms of the deal have not been disclosed.

The deal represents another example of Intel’s shift toward software development and away from a pure focus on building chips. In 2010 Intel acquired the software security firm McAfee for $7.7 billion. The idea behind that deal was to marry Intel chips that go into PCs and servers and other devices with McAfee’s various security capabilities.

The software and services group, which includes both McAfee and Wind River Systems, which Intel acquired in 2009 and which is run by Renée James, is a relatively small unit within Intel. In 2012, the company reported sales just under $2.4 billion, or about 4.5 percent of revenue. The group reported an $11 million operating loss according to Intel’s latest 10-K filing with the U.S. Securities and Exchange Commission.

Worldwide, Gartner says, companies and organizations will spend a combined $3.8 trillion on hardware, software, IT services and telecommunications. That’s $100 billion higher than the last forecast it made in October.

While the U.S. avoided the fiscal cliff that five months ago cast a pall over everything related to the global economy and thus IT spending, the automatic sequestration that has mandated sudden cuts in government spending has offset any gains. And while Europe has settled down, the latest sovereign debt issues in Cyprus have also served as something of a setback. Both are seen as short-term headwinds.

Spending on devices — smartphones, tablets and printers — has grown like crazy, which shouldn’t surprise anybody, and will continue to grow, the firm says. Last year, spending on devices was $665 billion globally, and is expected to reach $718 billion this year, or 8 percent more.

Spending on enterprise software is running a close second, and is expected to grow by more than 6 percent to $297 billion. Here, a slowdown in IT operations management software is being offset by growth in spending on database management systems.

IT services and data center systems are also expected to grow this year, but a bit more slowly than in the previous forecast. Spending is coming down in the near-term on external storage and in Europe. IT services is seeing some intense price competition and redirection of budgets away from new consulting projects.

The slowest-growing segment will be telecom services, which declined last year. Gartner says it will generate about $1.7 trillion in revenue, up about 2 percent from last year. Declines in spending on voice are being offset by mobile data.

The verdict from a jury in the U.S. court for Texas’ Eastern District dealt a serious blow to VirnetX, a Zephyr Cove, Nev., company that uses its patent portfolio to seek revenue from licensing fees or court judgments. Most of VirnetX’s revenue has come from a $200 million settlement reached with Microsoft Corp. in 2010, according to research firm ISI Group.

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Basically, it comes down to subbing out all the proprietary hardware that’s used to build up a network and instead setting all the parameters for how you run a network in software that’s running on commodity hardware.

Well, as the networking industry starts to get its head around all this, the time has come to set some standards. Standards-setting is a kind of nuanced, political process that can take years and requires the patience of a diplomat.

Today we heard an interesting shout in all this from Dell. The computing giant, which also has a small networking business, said it has aligned itself with the Object Management Group, a.k.a. OMG, and has proposed a working committee that would set standards around software-defined networking. The committee’s first meeting will be in April.

So, what does OMG do? It’s a nonprofit organization whose task forces set out to get everyone working on the same page, so that different systems from multiple vendors can work together. Dell is a member, as is Hewlett-Packard, which has its own sizable networking business. IBM is a member, too, though there’s no word on whether or not it will join this task force.

One company that probably won’t: Cisco Systems. And there’s a reason for that. Cisco has its own standards-setting effort under way. It’s code-named Daylight, and is supposedly going to be announced at the Open Networking Summit in Santa Clara in April. Some critics say Cisco is trying to make its proprietary technology central to it.

I may be wrong, but it seems that a cold war is breaking out over software-defined networking. It may not matter. Dell’s networking business is relatively small, and this could turn out to be something of an insurgent effort. Then again, there are a lot of people who think the whole idea behind software-defined networking is intended specifically to go against the idea that networking gear should be proprietary, which is exactly what Cisco has specialized in for years.

Anyway, the politics of setting standards are always confusing and deeply technical. But the fact that this process is getting under way at all is an interesting development around the whole SDN trend, and bears watching.

The latest market data from research firm Gartner found worldwide server sales declined by 0.2 percent, even as revenue from sales of those servers increased by more than 5 percent. For the full year though, sales increased by 1.5 percent on a unit basis, while revenue declined slightly.

Budget worries caused many companies to hold back on replacing older x86 machines, Gartner said, especially in the enterprise and in some mid-tier data centers. That no doubt factored into some worries around Intel’s outlook when it reported Q4 earnings last month. The only ones really buying were big players like Google, Facebook and China’s Baidu. Sales of RISC-based machines running Unix, as well as specialized hardware like Hewlett-Packard’s Itanium servers, were also weak.

IBM made the most on a revenue basis, clocking in sales worth north of $5 billion, while HP sold the most on a unit basis, with a little less than 664,000 units.

On a regional basis, North America saw unit shipments grow 5.5 percent, followed by Asia/Pacific at 3.4 percent, and Latin America, which was essentially flat.

Europe, on the other hand, declined substantially, and that’s where a lot of the pain was. As sovereign debt and economic concerns continued to take much of the oxygen out of the room in those countries, server sales declined by more than 10 percent on a unit basis, Gartner said. Most companies there saw their unit sales decline except for Japan’s Fujitsu and Cisco Systems. In Cisco’s case, its unit sales grew by nearly 20 percent, but that was off a low base relative to the other vendors. By comparison, Cisco sold about 14,000 servers in the region, versus HP which sold nearly 248,000.

Looking ahead to the rest of 2013, Gartner said to expect modest growth, offset a little by a boost in the use of virtualization, which allows one physical machine to run as if it’s many virtual machines. Virtualization logically tends to eat into the overall volume of machines needed. Simply put, where you once needed two or four or eight servers, it’s pretty likely you can now, given the improvement in processing power plus virtualization, replace them with one or two or three.

Here’s the worldwide breakdown for the top five vendors in the quarter, revenue first.

Today’s earnings report, which is expected after the markets close for trading in New York, will be the first since the end of HP’s worst year ever. The list of its woes is well known. There was the Autonomy acquisition, which contributed more than $5 billion of an $8.8 billion write-down that shocked shareholders. That write-down came on top of another write-down, this one worth about $8 billion, on the 2008 acquisition of the IT services firm EDS. During 2012, HP’s shares traded at levels not seen since 2002, going back to the days immediately following its mammoth acquisition of Compaq Computer.

That acquisition made HP the world’s biggest vendor of personal computers, a market that is now in decline, but which affords HP a certain amount of scale that helps it in other businesses. Combined, PCs and printers, another declining market, amount to about half of HP’s revenue, and more often than not get most of the attention from shareholders. And for that reason it’s not exactly difficult to find Wall Street analysts who have rated HP shares with a “sell” or equivalent. Though likely untrue, persistent rumors that say a breakup or sale of a significant business unit is coming continue to goad HP shares higher. “Talking to investors, the biggest story on HP these days isn’t about its business fundamentals but whether the company will split itself in two or more pieces,” analyst Shaw Wu of Sterne-Agee wrote in a research note today.

The consensus of analysts polled by Thomson Reuters calls for HP to report a per-share profit of 71 cents on sales of $27.8 billion. The bar, however, is relatively low: A year ago, HP reported per-share earnings of 92 cents.

CEO Meg Whitman has made a persistent case that, despite all its recent troubles — and calling them “troubles” feels like describing World War I as a case of bad vibes — HP will not only be saved, but will remain whole. She has also characterized 2013 as the year during which the arduous work of repairing and rebuilding will begin in earnest.

Whitman has been hinting publicly that signs of the turnaround are coming, though they’re not yet visible. The narrative at HP lags reality, she said at The Wall Street Journal’s CIO Network conference last month.

For the moment, Whitman seems to have earned the trust of HP shareholders impatient for more positive results. She has been on the job 17 months, and on her watch, HP shares are down about 25 percent, while the S&P 500 has risen by 32 percent. By that benchmark, Whitman compares favorably with former CEO Carly Fiorina, who, at the 17-month mark, presided over a 46 percent drop in HP shares, while the S&P 500 was down only 6 percent. But at the same point in the Mark Hurd era, HP shares were up by 66 percent, well ahead of the S&P 500, which was up only 11 percent. (Whitman’s immediate predecessor, Léo Apotheker, never made it to 17 months.)

If that’s true, then there’s a good reason to expect that the turnaround she anticipates will be visible first in HP’s enterprise-facing businesses. In this, HP has a new weapon upon which rests a great deal of hope. It’s called Project Moonshot. Announced late in 2011, it is a fundamental rethinking of a server.

I saw an example of one during a meeting last month with Dave Donatelli, HP’s executive vice president and head of its enterprise business, during a recent visit to the company’s headquarters in Palo Alto, Calif.

It’s about the size of a trade-paperback book — and not a very thick one, either — yet it’s a full-blown server. It comes in flavors running Intel’s low-power Atom chip, but also ARM-based chips, and can be outfitted with many of them. For storage, it can be configured with a conventional spinning hard drive, or a flash-memory-based solid-state drive. It can also be tricked out with a lot of system memory, and with a graphical processor unit (GPU) like those from Nvidia, which are increasingly being used to give computers some extra oomph on certain kinds of computing jobs.

The case Donatelli makes is simple, and can’t help but resonate with customers, especially with those building large data centers: When compared to a mainstream HP server currently on the market, one built using the Moonshot approach consumes 89 percent less power, and requires 94 percent less physical space. “We imagine a world where you can fit thousands of these servers in a single rack,” he says. “It really is a fundamental revolution in how servers work.” And no one, Donatelli says — not Dell, not IBM, not Oracle — makes anything quite like it. And it will begin shipping soon.

Moonshot will be an important piece of HP’s strategy, especially as many big companies seek to build massive data centers running hundreds of thousands of servers at once. Large companies increasingly want to get the same economies of scale that smaller ones get by farming out their IT infrastructure to cloud companies like Amazon Web Services and Rackspace, but they don’t always want to let go of their IT infrastructure entirely. And then there are the cloud service providers themselves. “Many of the large cloud providers run 250,000 or maybe even a half a million servers. Within three to five years we’ll be talking many times that amount,” Donatelli says. “Those data centers will get very expensive, and they won’t be very environmentally friendly.”

And there are other important pieces on HP’s chessboard. HP’s cloud services business — which will presumably be a big consumer of Moonshot hardware, Donatelli says — is already a multibillion-dollar business. And its 3Par enterprise storage business — a company HP acquired in 2010 after a bitter bidding war with Dell — reported record sales in its most recent quarter. Then there’s enterprise networking, a business built primarily out of 3Com, a company HP acquired in 2009. Only Cisco Systems is bigger in that business, Donatelli says, and, yes, it’s a lot bigger, comprising about two-thirds of the addressable market, leaving HP and everyone else to fight over the remaining third. But that’s a fight that HP is winning, beating out, in the reckoning of research firm IDC, players like Alcatel-Lucent, Juniper and Huawei.

And what of Business Critical Servers, the unique HP business built on Intel’s exotic Itanium chip? Long a source of beefy profits derived from services supporting Itanium’s finicky customers, HP’s BCS business suffered from an injection of doubt about its future, whipped up in no small part by Oracle, which insisted that HP intended to kill the platform. Oracle said it would stop making software that supported it. That prompted a lawsuit from HP, which argued that Oracle had agreed to continue supporting Itanium, and was bound by that agreement. HP won, but it hasn’t helped HP sell more Itanium servers. That’s because, Donatelli says, Unix-based servers are fundamentally a business in decline. “That marketplace is in secular decline,” he says. “Although you and I will be here five years from now, and will still be talking about it, it is a shrinking market. We will drive as much revenue as we can from it and, over time, it will disappear.”

HP recently updated its line of Itanium servers with a machine that’s three times faster than its predecessor. But there’s also a solid business capturing recovering Unix customers and helping them move to more mainstream platforms running Linux and traditional Intel chips. HP does offer a “mission critical” server that contains a mainstream Intel Xeon processor. Expect more like that.

And what of those declining service revenues related to BCS? The good news is that they will decline slowly. Itanium customers aren’t exactly known for moving fast or swapping out their machines that often. The better news is that HP’s 3Par storage line carries with it an interesting service profile that’s kind of similar to what has been the norm with Itanium. “There is a backfill coming to replace what is being lost,” Donatelli says.

And while he couldn’t get specific — HP will be more specific when it reports its results later today — Donatelli said 2013 looks like it may be an important transitional year for HP customers, and thus for HP itself. “We see more and more customers starting to rethink how they run their operations, and how they can change them significantly,” he said. “We think that’s a big opportunity. The enterprise doesn’t move like a light switch. It moves gradually. But when it starts to move, it really moves.”

I had a short conversation with Chambers last night, shortly after the earnings report was released. Here are the highlights:

AllThingsD: John, you were just on CNBC a little while ago, talking about how some of your customers are seeing a slow start to 2013, but generally feeling positive. Your shares moved after-hours in reaction to that, and people tended to focus on that. Can you unpack what you meant?

Chambers: I talked about a lot of positive things, and I think sometimes people will take one element and focus on it. When you have record earnings and record revenues, and you’ve done that for eight quarters in a row, the key takeaway about the quarter has to be that our vision and strategy is working. Many times — not entirely — but many times, we’re out-executing the vast majority of our peers. The second element is not that Cisco is off to a slow start in 2013, it’s more that 2013 is off to a slow start economically in terms of what our customers are saying to us. I believe, based on what they are telling us and based on our order trends, that it appears to be, barring government mis-execution in a big way, I think we can handle a short-term pause. But, barring a big economic surprise, it’s just going to be a slowly improving year. My customers are saying it’s looking like a better year than they’ve seen in a couple years, and the trend is up and to the right, but it is coming off a slow base. So I think we’ll see relatively slow GDP growth in the U.S.

That seems to be the sentiment right now.

Yeah, most of my customers are saying they see a point and a half of GDP growth in the first half of the year, and unfortunately that means they’ll spend to that. On the other side, our enterprise and commercial accounts are showing two quarters in a row of really solid growth. And they’re usually a good indicator two to four quarters out.

So would you say you’re expecting something of an acceleration later in the year?

I would use a different phrase for it. I’d say cautious optimism. There are some very smart people who are very negative not just on Europe but on the U.S. So our eyes are wide open to the fact that we may be of the minority view. But we have the advantage of seeing our order patterns among our customers, and being able to talk to most of the government global business leaders around the world.

What’s working and what’s not for Cisco right now?

I think what’s working are the vision and the strategy of the role of the network, and beginning down the path of being the No. 1 IT player in the world. This quarter was another proof point of that, especially in the data center, but also in software. Secondly, what’s working is key technology trends, such as cloud and data center, mobility and video — all had very good quarters. What’s not working is that we’d like to see things growing faster on a global basis. Assuming we continue to be a reasonably good barometer of the global economy, we’d like to see these things growing a little faster.

How do you feel about the competitive landscape?

We love to compete, and we try to always compete with class. And we compete to win the market transitions. So let’s look at those. In the transition in the cloud and the data center, we’re challenging the incumbents that have been there for two decades. Let’s face it, servers are a commodity. And yet our servers get a dramatic premium, and they are tied very tightly to a switch. And we’re winning with a 65 percent growth rate in a market where our peers are flat or growing in low single digits. The second thing that is working is mobility. It was an Achilles’ heel about two or two and a half years ago. Now we’re the leader in most segments of mobility that have profits. So mobile edge, mobile backhaul, mobile packet edge, wireless LANs, small-cell, integrating it all together with wired capability. And collaboration tied to it, it really feels good to win there. The third thing would be in video. We’re making a pretty good transition from a set-top box where we’re making very little profit, and we’re starting to walk away from deals where people won’t pay for an architectural play; we just don’t bid on it. And, in spite of that, we’re up about 20 percent, mostly on software from NDS, so the market is going where we want it to go. It’s too early to say how far along we are in becoming the world’s No. 1 IT player, or the Internet of everything. I’d say a little bit of progress there, but it’s way too early in the ball game to say.

While the initial results beat expectations slightly, Chambers’s comments about a “slow start with steady improvement through the year,” made on CNBC, pushed the shares down by more than 2 percent in after-hours trading. He also said he expects market conditions to improve “at a much slower pace than we would like.” (See the video below.)

Cisco has often argued that its purchasing patterns tend to serve as an early warning sign of the health of the global economy, especially given its exposure to government spending both in the U.S. and around the world.

Cisco said it expects to earn between 48 cents and 50 cents per share in the next quarter and that it expects sales to grow by about 4 percent to 6 percent. It also said it expects gross margins, an important indicator of profitability, to be in the range of 61 percent to 62 percent.

Here’s the CNBC video.

And this is the point at which I pick a song that characterizes Cisco’s earnings. Given Chambers’s language earlier about a “slow start” to the year, and combined with Cisco’s new marketing campaign with the tag line “Tomorrow Starts Here,” I mashed up those two things and came across the song “Future Starts Slow” by The Kills. Enjoy.

Cisco reported earnings of 51 cents per share on revenue of $12.1 billion. The results beat the consensus expectation of Wall Street analysts surveyed by Thomson Financial of 48 cents on sales of $12.06 billion.

I’ll have more as I get a closer look at the numbers.

Here’s Cisco’s original announcement:

Cisco Reports Second Quarter Earnings
SAN JOSE, CA–(Marketwire – February 12, 2013) – Cisco (NASDAQ: CSCO)

Q2 Net Sales: $12.1 billion (increase of 5% year over year)
Q2 Earnings per Share: $0.59 GAAP (includes tax benefits of $0.17); $0.51 non-GAAP (includes a tax benefit of $0.01)
Cisco, the worldwide leader in networking that transforms how people connect, communicate and collaborate, today reported its second quarter results for the period ended January 26, 2013. Cisco reported second quarter net sales of $12.1 billion, net income on a generally accepted accounting principles (GAAP) basis of $3.1 billion or $0.59 per share, and non-GAAP net income of $2.7 billion or $0.51 per share.

GAAP net income and GAAP earnings per share for the second quarter of fiscal 2013 included total tax benefits of approximately $926 million or $0.17 per share, related to a tax settlement with the Internal Revenue Service and related to the reinstatement of the U.S. federal research and development (R&D) tax credit on January 2, 2013. Non-GAAP net income and non-GAAP earnings per share for the second quarter of fiscal 2013 included a tax benefit of approximately $60 million or $0.01 per share as a result of the reinstatement of the U.S. federal R&D tax credit on January 2, 2013.

“Cisco delivered record earnings per share this quarter and record revenue for the 8th quarter in a row in a challenging economic environment. We continue to drive the innovation, quality and leadership our customers expect, and we remain focused on consistent returns to our shareholders,” said John Chambers, Cisco chairman and chief executive officer.

“In terms of the future, we are making solid progress towards our goal of becoming the #1 IT company in the world. As new markets grow and are created, such as the Internet of Everything, it’s very easy to see how the intelligent network is at the center of that future. Our customers already understand that Cisco has the architectures, solutions and services to best help them deliver the business results they need and we are honored to work with them and serve them each and every day.”

Net sales for the first six months of fiscal 2013 were $24.0 billion, compared with $22.8 billion for the first six months of fiscal 2012. Net income for the first six months of fiscal 2013, on a GAAP basis, was $5.2 billion or $0.98 per share, compared with $4.0 billion or $0.73 per share for the first six months of fiscal 2012. Non-GAAP net income for the first six months of fiscal 2013 was $5.3 billion or $0.99 per share, compared with $4.9 billion or $0.90 per share for the first six 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 second 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 $3.3 billion for the second quarter of fiscal 2013, compared with $2.5 billion for the first quarter of fiscal 2013, and compared with $3.1 billion for the second quarter of fiscal 2012.
Cash and cash equivalents and investments were $46.4 billion at the end of the second quarter of fiscal 2013, compared with $45.0 billion at the end of the first quarter of fiscal 2013, and compared with $48.7 billion at the end of fiscal 2012.
Dividends and Stock Repurchase Program

During the second quarter of fiscal 2013:

The combination of cash used for dividends and common stock repurchases under the stock repurchase program totaled approximately $1.2 billion.
Cisco paid a cash dividend of $0.14 per common share, or $743 million.
Cisco repurchased approximately 25 million shares of common stock under the stock repurchase program at an average price of $20.15 per share for an aggregate purchase price of $500 million. As of January 26, 2013, Cisco had repurchased and retired 3.8 billion shares of Cisco common stock at an average price of $20.34 per share for an aggregate purchase price of approximately $76.9 billion since the inception of the stock repurchase program. The remaining authorized amount for stock repurchases under this program is approximately $5.1 billion with no termination date.
“We delivered another solid quarter achieving profitable growth which contributes to increasing shareholder value over the long term,” stated Frank Calderoni, Cisco executive vice president and chief financial officer. “We are executing consistently, and we remain confident with our financial strategy while capitalizing on strategic investment opportunities to help drive our continued leadership in the industry.”

Select Global Business Highlights

Cisco announced and completed the acquisition of privately held Cloupia, Inc., a software company that automates converged data center infrastructure, allowing enterprises and service providers to simplify the deployment and configuration of physical and virtual resources from a single management console.
Cisco announced and completed the acquisition of privately held Meraki, Inc., a leader in cloud networking offering midmarket customers easy-to-deploy, on-premise networking solutions that can be centrally managed from the cloud.
Cisco announced and completed the acquisition of privately held Cariden Technologies, Inc., a supplier of network planning, design and traffic management solutions for telecommunications service providers.
Cisco announced and completed the acquisition of BroadHop, Inc., a provider of next-generation policy control and service management technology for carrier networks worldwide.
Cisco announced the investment of $6 million in the venture capital fund Monashees Capital, a leading Brazilian VC focused on Internet companies and online education.
Belkin announced its intent to acquire Cisco’s Linksys product line.
Cisco unveiled its new “Internet of Everything” global integrated marketing campaign, with a message that connecting people, process, data and things will make the network more valuable than ever.
Cisco Innovation

Cisco unveiled Videoscape Unity™, its new and expanded Videoscape™ video services delivery platform, empowering service providers and media companies to deliver new intuitive and synchronized multiscreen video experiences.
Cisco announced new solutions under the Cisco Unified Access™ umbrella that simplify network design by converging wired and wireless networks.
Cisco introduced Cisco StadiumVision® Mobile, a solution that delivers live video to mobile devices to create an entirely new fan experience in sports and entertainment venues.
Cisco introduced its advanced Wi-Fi location data analytics platform to help businesses enhance customer experiences and create new monetization opportunities to meet the needs of the growing number of connected consumers.
Cisco announced two new connected health offerings, Connected Health solutions and HealthPresence® 2.5, designed to meet the increasing need in healthcare for software and services that help enable efficient, convenient, high-quality patient care, and more collaboration across the healthcare continuum.
Select Customer Announcements

Cisco announced that Turkiye Is Bankasi (Isbank), the largest bank of Turkey, deployed a Cisco® Borderless Networks and Collaboration infrastructure to enhance business agility, speed product and service development, and better serve its customers.
ME Bank in Australia selected a Cisco and NetApp FlexPod® for VMware solution to help transform its information technology and operational excellence functions and to accelerate the speed with which it can introduce new business applications and services to customers.
SingTel announced that it is the first service provider in the Asia-Pacific region to globally deploy Multiprotocol Label Switching-Transport Profile (MPLS-TP) technology for its ConnectPlus E-Line service, providing its multinational corporation customers with scalable high-speed connections worldwide.
Xerox selected Cisco Unified Computing System™ to deliver its cloud-based global managed print services.
Cisco announced that Eastlink, a leading telecommunications service provider in Canada, is using Cisco Videoscape™ to power its new mobile video platform, Eastlink To Go, designed to deliver new consumer experiences anytime, anywhere.
Cisco announced that Telefonica Global Solutions, part of the Telefonica Group, a leading global provider of telecommunication services for fixed and mobile carriers, ISPs and content providers, selected Cisco for its enhanced Internet Protocol Next-Generation Network.

The venture arm of the world’s biggest chip company joins other investors — including Goldman Sachs, Index Ventures, Khosla Ventures and Redpoint Ventures — and brings the total amount of capital raised to $45 million.

Remember, software-defined networking (SDN) aims to do to networking gear what virtualization companies like VMware have done to servers. In the same way that one server can be virtualized into many, all with different configurations, the point of SDN is to make networks as easy to spin up, configure and expand as virtual servers in the cloud, all of it done via software. VMware, for its part, is in the game via its purchase last year of Nicira, the first SDN company I ever heard of.

The idea is considered a metaphysical threat to established networking companies, specifically Cisco Systems; analysts, specifically J.P. Morgan’s Rod Hall, have worried that Cisco isn’t ready to meet the threat.

I had a quick chat with Guido Appenzeller (that’s him in the photo above, at the left of president and co-founder Kyle Forster), and he said that Intel, which does make some specialized networking chips, sees some alignment of interest with Big Switch in the future of SDN.

As I noted before, Big Switch’s approach has a lot of industry support. Its partners include Juniper Networks, Citrix, F5, Dell, Microsoft and Palo Alto Networks.

Seagate, which is the world’s biggest supplier of hard drives to PC and server manufacturers, will offer a complete line of flash-based products to its OEM and distribution partners. It will also work jointly with Virident on developing new flash-based storage products.

The investment is a strategic round, and Seagate will nominate someone to Virident’s board of directors. Virident launched in 2006 and has raised more than $63 million in four rounds of funding. Its most recent round was a $26 million series D led by Mitsui Global Investments. Other investors include Globespan Capital Partners, Sequoia Capital, Intel Capital, Cisco Systems and Artiman Ventures.

Separately, Seagate reported a fiscal second-quarter profit of $492 million, or $1.30 a share, on $3.7 billion in revenue. The results were better than the $1.27 analysts had expected. The company also said it shipped 58 million disk-drive units in the quarter ended December 28. Seagate’s shares rose 2.7 percent in after-hours trading.

Word just hit the wires that Belkin, the company behind numerous consumer accessory products like Web cams, power strips, cables, phone cases and such, just announced that it will buy Cisco’s consumer home networking unit, Linksys. Financial terms aren’t being disclosed, at least not by Belkin as yet, though the price may show up in a Cisco filing sooner or later. However, the company, which has an existing consumer networking business, says the deal will give it a 30 percent foothold in the retail home and small-business networking market, where competitors who come to mind include the likes of Netgear, Apple and D-Link.

The sale essentially completes the process that Cisco started in 2011 when it shut down Pure Digital, a high-profile consumer brand it acquired that was best known as the maker of the popular line of Flip Digital video cameras. Another consumer product to get the ax at Cisco in recent months: The Umi home video conferencing product.

Here’s Belkin’s announcement:

BELKIN ANNOUNCES INTENT TO ACQUIRE CISCO’S HOME NETWORKING BUSINESS UNIT

Acquisition to Bolster Belkin’s Position in the Home Networking Market, Building on the Strong Linksys Brand and Innovative Suite of Product and Software Solutions

Playa Vista, Calif. – January 24, 2013 – Belkin, a private company based in Playa Vista, Calif., with operations and sales in more than 100 countries, today announced that it has entered into an agreement to acquire Cisco’s Home Networking Business Unit, including its proven products, technology, well-known Linksys brand and talented employees. With global operations, Linksys’ main office is located in Irvine, Calif.

“We’re very excited about this announcement,” said Chet Pipkin, CEO of Belkin. “Our two organizations share many core beliefs – we have similar beginnings and share a passion for meeting the real needs of our customers through the strengths of an entrepreneurial culture. Belkin’s ultimate goal is to be the global leader in the connected home and wireless networking space and this acquisition is an important step to realizing that vision.”

Belkin intends to maintain the Linksys brand and will offer support for Linksys products as part of this transaction. All valid warranties will be honored by Belkin for current and future Linksys products. After the transaction closes, Belkin will account for approximately 30 percent of the U.S. retail home and small business networking market.

“Linksys pioneered wireless connectivity capability around the globe, and has a strong brand renowned for its premium market position, the strength of its installed base and its proven dependability. Linksys users benefit from peace of mind in their home networking environment. At Belkin we have developed great insight into consumer needs, and the experiences, solutions and products we bring to the market, including our WeMo home automation platform, will help us to grow Linksys’ market presence,” Pipkin said.

“Linksys is one of the leading home networking providers and has created a market-leading suite of products and services to meet customer needs,” said Hilton Romanski, VP Corporate Business Development, Cisco. “While part of Cisco, Linksys has continuously innovated, while strengthening the brand and expanding its market leadership. As part of Cisco’s commitment to service providers, we are pleased about this strategic relationship with Belkin to build on Linksys’ position of strength.”

”With complementary innovation and engineering strategies in the combined organization, Belkin will be able to create new opportunities for consumers, distribution partners and resellers, and will have the strongest retail presence in the U.S. networking marketplace. Belkin also will have access to a large installed base that will be able to upgrade their networking environment to take advantage of new technologies in the smartphone, tablet, notebook and home automation arenas,” Pipkin said. “Additionally, Linksys will enhance Belkin’s capabilities to meet the needs of the service provider space and small business users.”

Belkin and Cisco intend to develop a strategic relationship on a variety of initiatives including retail distribution, strategic marketing and products for the service provider market. Having access to Cisco’s specialized software solutions across all of Belkin’s product lines will bring a more seamless user experience for customers. Merging the innovation capabilities of Linksys and Belkin provides a powerful platform from which to develop the next generation of home networking technology.

“At Belkin, we’re committed to enabling great experiences for users of today’s mobile and connected home technologies,” Pipkin said. “The acquisition of Linksys and the combination of Belkin’s and Linksys’ expertise and innovation will position us to meet the demands of today’s rapidly evolving advances in technology. We look forward to honoring the heritage of the Linksys brand and investing in the continuing evolution of its product portfolio. Together, we will provide a powerful, simple to use, and reliable wireless and networking platform for the markets we serve.”

Specific financial terms of the transaction are undisclosed. The transaction is subject to various standard closing conditions and is expected to close in March 2013.

Sales in Q4 at $353 million, while down 9 percent year on year, were in line with analysts expectations, while profits at 17 cents beat expectations by two cents.

I talked briefly with CEO Andrew Miller, who said a recent deal with AT&T will help its competitive stance against rival Cisco Systems in the videoconferencing space. “The AT&T deal really put the industry on notice,” Miller said.

Additional existing deals with IBM and Microsoft, via its Lync service, remain in place, and contributed to the 5 percent rate of sequential growth in the quarter. Polycom has also been battling a perception that its videoconference business has been under attack by startups. The company launched a significant upgrade to its videoconferencing technology in October. “Last year was all about people talking about Vidyo and Blue Jeans,” Miller says. “We think we have the most compelling product, heading into 2013.”

Intucell was founded in 2008 and is backed by about $9 million $6 million in venture capital investments from Bessemer Venture Partners. It specializes in enabling wireless cell towers to communicate with each other, and uses software to expand and shrink their wireless cells on a real-time, as-needed basis to avoid service disruptions for users where wireless phone traffic is crowded. It also allows wireless networks to repair themselves.

AT&T was an early Intucell customer and has deployed its technology throughout its footprint of wireless infrastructure.

The deal fits with Cisco in two ways. First, Intucell does business with wireless service providers that are part of Cisco’s bread-and-butter business. Second, it brings some software capabilities to the table that are fundamentally similar to the software-defined networking paradigm that has Cisco and other networking companies so excited these days. The idea is basically this: Software controls can define and dynamically control the size and configuration of a network, rather than swapping out hardware.

“We believe management and optimization software for networks is increasing in importance and the acquisition reflects Cisco’s desire to add more software-oriented capabilities,” ISI analyst Brian Marshall wrote this morning in a short note to clients on the deal.

Cisco shares fell slightly on the news and were trading at $20.80 by mid-morning. The shares are up 39 percent from their 52-week low of $14.96, reached in August.

I just received the following statement from a Cisco spokeswoman:

“We were surprised to learn that East Carolina University filed a complaint this morning. Cisco takes intellectual property rights very seriously, and we are confident that our new campaign does not create any confusion in the marketplace.”

Cisco is being sued in federal court by East Carolina University, the second-largest institution of higher learning in North Carolina (UNC is the biggest). ECU objects to Cisco’s use of the phrase in a branding campaign launched late last year.

ECU registered a trademark on the phrase in August of 2010. In its filing with the U.S. Patent and Trademark Office, it claims use of the phrase in connection with “education services in the nature of courses at the university level.”

Cisco registered to use it in December of 2012 for the following purposes:

Computer hardware and software; computer hardware and software for interconnecting, managing, securing and operating local and wide area networks and telephony systems; computer hardware and software for transmitting, securing, storing, uploading, posting, displaying, tagging, editing, organizing and processing data, audio and video; computer hardware and software for conferencing services; computer hardware and software for instant messaging and presence identification; telephones; wireless communications devices, namely, wireless hardware and software for the transmission of data, audio, and video; call processing software for the transmission of data, video, and audio; downloadable electronic instructional materials, namely, manuals, guides, test materials, and magazines in the field of technology; computer software for use in social networking; electronic devices and software for recording, organizing, transmitting, storing and/or reviewing voice, audio, video, and/or data files; routers; switches; computer network adapters; computer servers; communications servers; computer hardware containing network security functionality, including firewalls, data encryption, and/or interoperability with network security protocols; set-top boxes.

Proving infringement generally means proving that the use of a trademark hurts the ability of one party who has registered for the right to use it will be compromised or that the marketplace will be confused. While ECU was certainly the first one — two prior trademark registrations, including one dating to 1995 by Time Warner, have been abandoned — Cisco will apparently argue in court that its use of the phrase to sell networking and computing gear shouldn’t be seen as interfering with the university’s ability to recruit students. Of course, that’s assuming the case ever gets that far.

Certainly ECU has the right and the duty to defend against the infringement of trademarks it owns. But here’s another consideration that can’t be discounted: ECU has by luck of the draw found an opportunity to sue one of the richest companies in the world.

Cisco had a combined $45 billion in cash and investments on its balance sheet at the close of its most recent quarter.

Meanwhile, ECU is a state school, and like most state institutions in the country, it’s facing a budget crunch. Chancellor Steve Ballard said the school is facing the “worst budget crisis in its history.” The school ran a $286 million operating loss in the 2011-2012 fiscal year. In 2011 the state of North Carolina cut ECU’s budget by 16 percent.

A successful trademark infringement lawsuit might just help close that budget gap. So would a settlement.

One big piece of that was a marketing and branding campaign launched at the end of 2012 at Cisco’s annual meeting with financial analysts in New York. Crossing the Web, TV, print and augmented reality, it featured the slogan “Tomorrow Starts Here.” Its intent has been to inject the importance of networking rather than computing as the most important aspect in the narrative of the Internet’s next phase of growth.

It turns out that Cisco is not the first to use that slogan, and the one that got to it first is steaming mad. North Carolina’s second-largest college, East Carolina University, based in Greenville, N.C., announced today that it has sued Cisco in federal court — it didn’t specify which court — for trademark infringement.

“ECU has used the mark ‘Tomorrow Starts Here’ for over a decade, including in national advertisements and publications such as Forbes and Wired,” the university’s chancellor, Steve Ballard, said in a statement. “We feel it is essential to take action to protect that defining trademark of our identity and vision.”

I’m not a lawyer, but from what I understand of trademark law, one of its cornerstone principles is that if you’re going to register a trademark, you have to be willing to defend it when someone uses it without your authorization, or you essentially give them permission to keep using it. So these cases are pretty routine.

But to prove infringement, you also have to prove that the use of the trademark is likely to cause consumer confusion. ECU makes a stab at a case in its press release announcing the suit:

ECU’s trademark “Tomorrow Starts Here” is a university-wide brand that represents an overlapping field of goods and services when compared with that of Cisco. For example, research initiatives through ECU’s College of Technology and Computer Science have created products and intellectual property that are actively being commercialized. ECU is also a leader in the field of distance education technology that is heavily promoted through ECU’s global online education program using the mark “Tomorrow Starts Here.”

A university supporting technology research and a networking giant selling routers, switches and cloud computing gear? Does that confuse you? My guess is that Cisco and ECU will in time come to a settlement. Cisco is flush with cash, something universities always need.

Here are two example videos, first Cisco’s, and then a sample from ECU. You be the judge. Are you confused?

Update: I initially called the college Eastern Carolina University. Sorry about that.