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.”

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.

Read the rest of this post on the original site »

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.

According to a pretty detailed report from Reuters, a provision of the government’s latest spending law requires three federal agencies — NASA and the departments of Justice and Commerce — to buy gear only after performing a cyber-security risk assessment carried out in consultation with law-enforcement agencies. Part of the assessment includes consideration of the fact that the equipment or its components may have been manufactured in China.

It’s the latest expression of official hand-wringing about China, and the fact that that country is proving not only to be a permanent and overpowering fixture in the world of tech manufacturing is complicated by the fact that it is also proving to be an adept and aggressive player in the ongoing digital cold war between the countries. It’s also a shot across the bow of China’s large tech equipment providers, like Lenovo and Huawei.

Last month, a U.S.-based research firm claimed to have traced numerous cyber attacks to a specific unit of China’s People’s Liberation Army, one operating within a particular building in Shanghai.

Before that, suspicions about China and its intentions, capabilities and actions in the cyber arena led to a White House-ordered review of claims of spying by the Chinese telecom firm Huawei. This followed a report by the House Intelligence Committee saying that Huawei and another Chinese telecom-equipment concern, ZTE, pose sufficient security risks that government agencies should avoid buying their equipment. This amendment, inserted into a continuing resolution intended to keep the government running through the end of September, essentially puts those worries into force with regard to those three agencies.

But, as I argued at the time, at least some of the federal worry has as much to do with what China might do as it does with what the U.S. is known to have already done. The joint U.S.-Israeli cyber campaigns against Iran using malware weapons like Stuxnet, Gauss and Flame say a great deal about the potential real-world damage that a cyber weapon might do. Stuxnet, you’ll recall, is said to have caused some of Iran’s nuclear centrifuges to spin out of control and explode in an attempt to set back that country’s nuclear research efforts.

Huawei in particular has had a difficult time proving that its links to China’s military establishment are sufficiently severed, and that in the event of open conflict its gear wouldn’t be turned into a surveillance and espionage tool against the U.S. Though, as Reuters notes in its story, Huawei doesn’t believe the bill applies to it. We’ll see.

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.

As most of the free world knows by now — from the ubiquitous media coverage that Facebook COO Sheryl Sandberg and her new book, “Lean In: Women, Work, and the Will to Lead,” has gotten of late — there are some nagging issues of women in the workplace.

That was also underscored by the huge debate that arose over Yahoo CEO Marissa Mayer’s new rule for the Silicon Valley Internet giant that eliminated work-from-home employees.

Now, Cisco CEO John Chambers is weighing in, after a meeting with Sandberg last week, ordering each of his top managers to come up with new women-focused initiatives and put them into their development plans.

More interestingly, in an internal email I obtained, he also noted that his own leadership in the area had been lacking.

“While I have always considered myself sensitive to and effective on gender issues in the workplace, my eyes were opened in new ways and I feel a renewed sense of urgency to make the progress we haven’t made in the last decade,” wrote Chambers.

He pointed out that only one-fourth of the networking giant’s employees and top execs are women, and only 20 percent out of one million networking academy students are women. Currently, Cisco’s highest-ranking woman is Padmasree Warrior, its CTO and strategy officer, and it has three women board members.

Still, wrote Chambers:

“After reading Lean In and listening to Sheryl, I realize that, while I believe I am relatively enlightened, I have not consistently walked the talk … What we have been doing hasn’t worked, and it is time to adjust.”

Here’s the whole memo:

From: John Chambers
Date: March 8, 2013, 6:21:49 PM PST
To: John Chambers
Subject: International Working Women’s Day … Cisco Resolution

To my leaders:

I had the opportunity yesterday to discuss Sheryl Sandberg’s new book Lean In with Sheryl and a group of my CEO peers. While I have always considered myself sensitive to and effective on gender issues in the workplace, my eyes were opened in new ways and I feel a renewed sense of urgency to make the progress we haven’t made in the last decade.

The data is startling. Women hold less than 14% of CEO positions, 17% of board seats globally, and 18% of congressional officials … and these numbers have not changed in a decade. At Cisco, less than 25% of our employees — and our leaders — are women. Only 20% of our current one-million networking academy students are women.

Today is International Working Women’s Day, and I want us, the leaders of Cisco, to see this as a leadership moment. Without realizing it, we operate every day with gender stereotypes and biases, many of which we do not realize. After reading Lean In and listening to Sheryl, I realize that, while I believe I am relatively enlightened, I have not consistently walked the talk. I think each of you, on reflection, will identify opportunities to operate at a new level with your women employees, leaders, customers, partners, and peers. I believe we — together — need to drive a fundamental culture change and it is up to us as leaders to make this change happen. What we have been doing hasn’t worked, and it is time to adjust.

I have two specific asks for each of you: 1) please read the copy of Lean In you will be receiving shortly, before we get to the SVP/VP off-site and 2) determine 3-4 specific things you will do differently and detail those commitments in your development plan and if you need help, please contact Sandy Hoffman, Chief Diversity Officer.

I know each of us will have a different explanation and a different solution, and there is power in the diversity of those ideas in driving change. I am asking two champions — Chuck Robbins and Kelly Kramer — to take a leadership role in moving us forward. I will ask them to report to the Operating Committee every quarter on the progress we have made and the action plans in place.

I think Sheryl says it best: “We can no longer pretend that biases don’t exist, nor can we talk around them … the result of creating a more equal environment will not just be better performance for our organizations, but quite likely greater happiness for all.”

Kath Weslock, Chief Human Resources Officer and I look forward to discussing this topic with many of you. We believe we have an opportunity to make a tremendous difference, and in so doing benefit our people, our culture, our company and, just maybe, the world.

John

HP shares are rising after hours on word that the company rather handily beat its own expectations and those of the Street. The consensus view called for it to report 71 cents a share in per-share earnings. HP came in at 82 cents. Sales were also ahead of the consensus, despite the fact that revenue fell in nearly every significant business segment.

Still, don’t harsh HP’s buzz with too many details. There’s more to crow about: Net debt of the operating company came down by $1 billion to $4.7 billion, and it’s looking like HP will be close to zero debt for the operating company this year.

The results if nothing else buy Meg Whitman and her team some time to quiet the critics who say HP should be split into two or more companies in order to unlock value. That buzz was prominent late in the trading session as rumors flew that a breakup announcement might accompany earnings. As careful AllThingsD readers might have already guessed, a breakup isn’t in the cards, at least not for the time being.

The conference call with analysts is about to get under way momentarily and I’m listening in. Expect lots of questions about the balance sheet, and probably more chatter about the breakup idea.

One bit of housekeeping: Since I’m in New York, the time stamps are set to Eastern Standard Time.

Earlier:
5:05 pm: Joining the call in progress. CEO Meg Whitman is speaking. She says the restructuring program put in place last year is having the desired effect.

Whitman: We improved operating company net debt position for the fourth consecutive quarter.

Whitman: Revenue from converged storage products was up 18 percent.

Whitman: In servers, business stabilized. We expect to grow market share by 1 percentage point this year.

Whitman: Networking showed continued growth, up 6 percent. I was also pleased with performance improvements in printing. New business models and new printers helped boost operating margins.

One thing that changed in developing markets is that the price of hardware has increased while the price of ink has dropped. That’s the Ink Advantage program she’s talking about.

Whitman: PCs gained 1.4 percentage points of share world wide, and 4 points in the U.S.

Whitman: Total enterprise services exceeded expectations. There is still a long way to go, but I believe that ES (the former EDS) will deliver on the recovery plan put in place last year.

Whitman: We are making significant investments to improve our channel partner programs.

Whitman: If we can mobilize HPs 300,000+ employees there is nothing we can’t do.

Whitman: Turnarounds happen when old and new customers believe. In HP’s case customers are really starting to believe. We saw a number of big wins including one with the U.S. Department of Veterans Affairs. Another is eyewear company Luxottica (sorry if I misspelled that), which hired HP to run its data centers.

Whitman: We clearly still face a long road ahead. I don’t like that we saw revenue declines in all our business lines. Restoring growth is a priority and we’re on it.

Whitman: It will be toward the end of the year before the recovery plan starts showing up on the top line.

5:14 pm: Whitman: There are a lot of reasons we are in the PC market. She’s addressing again why there won’t be a spinoff of the PC business.

Whitman: Pricing continues to be very competitive.

In Enterprise Group, we are seeing a tepid market in Europe for servers.

Whitman: We will now be breaking out converged storage from traditional storage to better show the growth there.

5:17 pm: Now Whitman is talking about the hiring of Larry Stack to reignite sales in the Enterprise Services group. (Wonder where you read about that first? You got it: AllThingsD.)

Whitman: Now talking about HP Labs under its new head Martin Fink.

Whitman: Talking about Project Moonshot. We expect this to truly revolutionize the economics of the data center.

Whitman: If just 10 large web services switched to Moonshot servers, they could save $120 million a year, and 100 million (?) metric tons of CO2 released into the atmosphere, because it consumes so much less power than prior models.

Whitman: I’m pleased about Q1 and feel good about the rest of the year.

Now CFO Cathie Lesjak is speaking.

Lesjak: At the highest level, I would characterize this quarter as one more data point in our consistent, but not linear, recovery plan.

Lesjak: Now she’s talking about some new reporting information disclosures.

Lesjak: (Going through the numbers again.) From a global economic perspective, we are still seeing headwinds, but some healthier pockets.

5:23 pm: R&D spending declined, though it was because of some tax credits and some contract accelerations in Q4.

Lesjak: Europe was a challenge, but we continue to see good signs in Asia-Pacific and Japan.

Lesjak: Decline in printer revenue is partially due to a shift toward higher-end printers and away from lower-priced ones.

Lesjak: Again, solid growth in server sales in Asia, especially in China.

Lesjak: Talking more about the storage business. Q1 was the fourth consecutive quarter where margins expanded. Now Business Critical Servers. Phase two of the trial with Oracle is expected in Q2, which will address Oracle’s breach of contract and damages.

(Though Oracle lost the first phase of the trial, it has promised to appeal the decision.)

Lesjak: In services, we have moved away from unprofitable contracts.

Lesjak: We saw strong growth in security and big data software offerings.

Now talking about cash and capital allocation. $253 million went back to shareholders through share repurchases, and $258 million via the dividend. Net debt is now $4.7 billion at the operating company level.

Lesjak: As we’ve said, 2013 is a fix-and-rebuild year. There are market and macro pressure and some of the ES changes are being delayed.

And now we’re heading into Q&A.

Question from Bill Shope of Goldman Sachs; he’s asking about the breakup idea.

Whitman: We have no plans to break up the company. (Heard that??) HP is better and stronger together.

Whitman: We have a terrific set of assets. When you think about our brand, our scale, our distribution, and importantly the customers want this company to be together. We feel strongly it’s better together.

Katy Huberty of Morgan Stanley: Earnings on the back half of the year look like they may come down. What else makes you cautious about the back half of the year?

Lesjak: It’s really about Enterprise Services not having the runoff in Q1 that we expected.

There’s also some challenges about the timing of signings.

Lesjak: There’s some cautious optimism there.

5:44 pm: Toni Sacconaghi of Bernstein: Where are you in your cost savings?

Lesjak: The non-labor savings are coming in later this year.

Question from Ben Reitzes of Barclays: I understand why you want to keep guidance in place, but why not raise the free cash flow target above $5 billion?

Lesjak: Glad you pointed out the operating cash flow. We’re happy with it, up 115 percent. We’ve really gotten a lot of discipline. We don’t typically update our cash flow mid year. Best way to think about it is that it was a very big deposit on the year.

Question from Shannon Cross: How will you judge the success of the OfficeJet ProX printer platform? How do you think about this versus your laser platform?

Whitman: This is an exciting opportunity because it prints at the speed and quality of a laster. We’re going to drive it as hard as we can. We’re going to measure the units installed. With regard to laser we have a great laser lineup, but if there is cannibalization; that’s the way business goes. If there’s going to be cannibalization, better we do it to ourselves than someone do it to us.

Missed a question there. Sorry about that.

5:53 pm: Question about Enterprise systems sales.

Whitman reminds us that BCS sales got whacked again. But there’s a good product lineup coming. Waiting for another mention of Moonshot.

Whitman: We have to make the right investments because it’s a big piece of HP’s profitability. (Lesjak just mentioned in the answer to the previous question that PSG accounts for only 10 percent of HP’s operating profitability.)

Another question, this one from Mark Moskowitz of J.P. Morgan. Clearly your net debt position is improving nicely. How are you thinking about investment internally from R&D and acquisitions?

Whitman: For 2013, we’re still focused on rebuilding the balance sheet and offsetting dilution. We’re going to stay focused on fixing what we have. You never say never, maybe there’s a tuck-in acquisition we have to have, but there’s nothing in the plan. Also, one thing we have to stop doing at HP is increase R&D and then pulling it back, and then repeating that. We’re going to stay on the plan that we have.

Question from Brian Marshall at ISI about the software business, where he’s seeing some deceleration of growth.

Whitman: The bright spots in software are Vertica and security. Apps and ops are not where we want them to be. We need to make some changes that will kick in by 2014. We have some basic blocking and tackling there.

Steve Milunovich asking about PC supplies and inventory.

Lesjak: Channel inventory on PCs, overall it’s good. On the consumer side, despite the fact we gained share in consumer we ended a bit higher than we would like. The real star is the channel inventory in printing. We have been dogged by ink supplies inventory being too high for several quarters. Now its down 27 percent since the peak. We’ve had dollar declines over the last six quarters.

Whitman: One of the things we’ve asked the business groups to do is limit discounting to get products out the door. It’s healthier for us and better for the channel. It also allows us to differentiate our ink and toner product and get away from the commoditization we were expecting about 18 months ago.

Final question from Credit Suisse: About free cash flow. Given the improvement, it looks like you will pay down most of your debt. If you are generating $6 billion to $7 billion in free cash flow each year, how dedicated are you to increasing dividends and buybacks?

Lesjak: At the end of the year we’ll be thinking about how we allocate capital around the time of the next analyst meeting. We are committed to returning cash to shareholders. Our view around dividends is that over the long term, our payout ratio should improve as well. We are aligned and working with the board to determine the mix.

6:05 pm: Closing remarks from Whitman: The turnaround is on track and we did better than we expected we would. We have to deliver and continue to execute as an organization.

And we’re done. See you next quarter!

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.”

Basically it shows that every line of business at Dell continues to be in decline — except one, and that’s the combined server and networking businesses.

Here’s the slide, and it may constitute something of a last look at the state of Dell before it completes its leveraged buyout.

As you can see, servers and networking grew 18 percent, versus everything else, which declined year over year. Separate them out and server revenue grew 5 percent, while networking grew 42 percent. While the growth seems healthy, it’s not enough to offset everything else. Servers and networking combined amounted to less than 19 percent of sales. Dell’s business shrank in the remaining 81 percent.

It’s hard to make shareholders happy when the trend lines look like that. So now you see, in one place, why Dell is going private.



Okay, so maybe this tech hasn’t hit its stride yet. But there are several new mobile phones that claim “NFC” as a feature.

So what does NFC mean, how does it work and will it finally catch on? These are questions that many consumers will have as they hear more and more about this technology — and here are some answers.

What is NFC, in a nutshell?



NFC, which stands for Near Field Communication, is a type of communication that involves wirelessly transmitting data from one hardware device to another physical object, provided that the devices are in short range (within 10 centimeters) of one another.



In order for NFC to work, both devices — say, for example, your smartphone and a payment terminal at your local CVS — have to have NFC chips and antennas embedded in them.

Though NFC might be new to you, the technology isn’t. The industry standard for it was established between 2003 and 2004. Over the past few years, NFC has become more prominent, but it’s still a long way from mass adoption. 


So … what is it used for? 



Some practical uses include bumping your phone against someone else’s to wirelessly (and paperlessly) exchange your contact information. You can also tap your phone against a laptop or computer to share photo files.



NFC is also used in marketing. You can, for example, tap your phone against an NFC-equipped movie poster or sticker, as long as the paper is embedded with an NFC chip, and more details about the movie will pop up on your phone’s Web browser.

One of the more interesting use cases I came across in my research was a beer dispenser created by a Google employee. It uses an NFC tablet to scan a person’s badge and determine if he or she is authorized to drink the beer. 

But, so far, the most prevalent use of NFC has been in payments.



But I can already tap my credit card to pay for things. Why is NFC any better than that?

You’re right: Consumers can already use a tap-to-pay method with some newer credit cards. But proponents of NFC on mobile argue that it’s even faster and easier to use the device that’s likely already in your hand — your smartphone — rather than digging around for the wallet that holds that credit card. 


Another big NFC pitch is that your smartphone could simultaneously store loyalty cards, coupons, tickets and boarding passes, so you could use your NFC smartphone to transmit and receive data in those accounts, too. 



However, that idea of the “mobile wallet,” or moving your credit cards and rewards cards to your phone, doesn’t necessarily require NFC. In fact, the mobile payments industry in the U.S. is pretty divided — there are those who are pushing NFC, and those relying instead on software solutions to make mobile payments.

The former includes Google Wallet, and a wireless industry venture made up of AT&T, Verizon and T-Mobile. The latter includes companies like Square, PayPal and even Apple, which offers a digital wallet app with the iPhone’s Passbook, though this mostly holds purchased tickets for things like flights and movies. 



Let’s say I’m into this idea of NFC. Which phones should I look for? 



Apple’s iPhone isn’t equipped with NFC, but here are some, though not all, of the newer NFC-equipped phones available in the U.S.: Samsung Galaxy Note and Galaxy S III, Google Nexus 4 and Nexus S, Nokia Lumia 820 and Lumia 920, Sony Xperia Ion, Motorola Droid Razr M and Droid Razr Maxx HD, LG Intuition, HTC Evo 4G LTE, BlackBerry Z10 and BlackBerry Q10 (as well as many older models of BlackBerry).

Okay, I ran out and bought an NFC phone. Where can I use it? 



It’s impossible to know how many NFC “tags” are floating around out there, and it’s unclear exactly how many retailers will accept payments from your NFC phone. The roll-out of these NFC solutions has been slow.

Google Wallet can be used to pay at some CVS, Duane Reade, Old Navy, Radio Shack and Macy’s stores. Isis, the mobile wallet app from AT&T, T-Mobile and Verizon, could theoretically be used at 200,000 retail locations across the U.S. That sounds like a lot, but Isis right now has an actual presence in just two cities: Salt Lake City and Austin.

Which of these phones has NFC?





And let’s say you have an NFC smartphone and you’ve found a store nearby that will accept it. It still might not be a super simple tap-to-pay solution at first.

In my experience, I had to tap my NFC smartphone against the payment terminal a few times before the transaction went through, and got dubious looks from a couple cashiers who weren’t familiar with the process. I’m positive that swiping my credit card would have been easier.

But at the same time I think that paying with smartphones will get smoother. 



Tapping to pay sounds easy … almost too easy. Is NFC secure? What if I lose my NFC phone?

Fraudsters are always trying different ways to tap into sensitive data. NFC technology has varying layers of security, depending on the use case and the hardware. 

When you link your NFC smartphone to your credit card, your data is actually stored in a tiny part of the hardware — like a little lock box within your phone. In some cases, this is in the SIM card, but it could be elsewhere in the phone, too. But note: this data is encrypted.

On top of that, you often have to punch in a personalized PIN on the phone in order to make a payment.


If your NFC phone is stolen, you can freeze or disable your payment account by calling the services or visiting a website. You can also call the credit card issuers directly and cancel your cards — just as you would if you lost your leather wallet.

So will NFC really catch on this time?


Some industry experts and analysts say NFC is still “three to five years” away from being mainstream — the same thing many were saying, well, three to five years ago. It has gained traction in parts of Europe and Asia, especially in Japan, where the wireless carriers have collaborated to push the technology.

NFC proponents say a mandate requiring retailers to update their payment terminals by 2015 could help nudge the technology along. And NFC is expected to be in more and more phones. All eyes are on Apple right now, to see whether NFC is included with the next iPhone.

But even with all of the tech infrastructure in place, there’s still the matter of changing consumer behavior — your behavior — one tap at a time.

]]> http://allthingsd.com/20130218/nfc-what-you-need-to-know/feed/ 27 http://allthingsd.com/20130214/a-quick-chat-with-cisco-ceo-john-chambers-about-earnings-and-the-year-ahead/ http://allthingsd.com/20130214/a-quick-chat-with-cisco-ceo-john-chambers-about-earnings-and-the-year-ahead/#comments Thu, 14 Feb 2013 17:35:00 +0000 Arik Hesseldahl http://allthingsd.com/?p=295250 Shares of Cisco Systems are falling today by more than 1 percent, following a quarterly earnings report that was probably more good than bad, and cautiously optimistic comments from CEO John Chambers about the state of the economy and the markets in which Cisco participates.

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.

]]> http://allthingsd.com/20130214/a-quick-chat-with-cisco-ceo-john-chambers-about-earnings-and-the-year-ahead/feed/ 0 http://allthingsd.com/20130213/cisco-beats-expectations-in-second-fiscal-quarter/ http://allthingsd.com/20130213/cisco-beats-expectations-in-second-fiscal-quarter/#comments Wed, 13 Feb 2013 21:10:06 +0000 Arik Hesseldahl http://allthingsd.com/?p=295028 Quarterly results from networking giant Cisco Systems just crossed the wires, and they’re above expectations. Cisco shares are moving up slightly after hours.

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.

]]> http://allthingsd.com/20130213/cisco-beats-expectations-in-second-fiscal-quarter/feed/ 0 http://allthingsd.com/20130207/intel-capital-joins-big-switch-funding-round/ http://allthingsd.com/20130207/intel-capital-joins-big-switch-funding-round/#comments Fri, 08 Feb 2013 05:00:10 +0000 Arik Hesseldahl http://allthingsd.com/?p=292787 Big Switch Networks, the software-defined networking startup that came out of stealth mode last year, has a new investor in its Series B round of venture capital funding: Intel Capital.

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.

]]> http://allthingsd.com/20130207/intel-capital-joins-big-switch-funding-round/feed/ 0 http://allthingsd.com/20130131/huawei-cfo-tied-to-company-implicated-in-attempted-sale-to-iran/ http://allthingsd.com/20130131/huawei-cfo-tied-to-company-implicated-in-attempted-sale-to-iran/#comments Thu, 31 Jan 2013 16:25:34 +0000 Arik Hesseldahl http://allthingsd.com/?p=290465 Someone working for a partner of the Chinese telecom giant Huawei was certainly eager to sell a bunch of Hewlett-Packard networking gear to a wireless phone provider in Iran.

Such a sale would of course be illegal under U.S.-imposed trade sanctions against that country. A report from Reuters says that didn’t appear to stop an executive connected to a Huawei partner company, Hong Kong-based Skycom, from trying anyway.

Reuters says Huawei’s CFO, Cathy Meng, daughter of Huawei’s founding CEO, Ren Zhengfei, sat on Skycom’s board for a little more than a year, ending in 2009. Skycom, which Huawei has previously described as a “major partner,” was apparently the entity through which the proposed sale was to take place, though no deal was ever done. And HP, for its part, was never involved in any of it.

Huawei says Skycom is a “normal business partner,” and requires all its partners to stick to its trade compliance system.

Huawei’s operations in Iran over the years have been part of the litany of complaints leveled against the company in a congressional report earlier this year. The other worry is that Huawei gear might be used in some way to spy on American companies and government agencies. A review of the company ordered by the Obama administration found no evidence of spying, but didn’t exactly allay any of those fears, either.

]]> http://allthingsd.com/20130131/huawei-cfo-tied-to-company-implicated-in-attempted-sale-to-iran/feed/ 0 http://allthingsd.com/20130123/cisco-acquires-israels-intucell-for-475-million/ http://allthingsd.com/20130123/cisco-acquires-israels-intucell-for-475-million/#comments Wed, 23 Jan 2013 16:28:31 +0000 Arik Hesseldahl http://allthingsd.com/?p=287799 Networking giant Cisco Systems said today it will spend $475 million to acquire Intucell, an Israel-based wireless technology company.

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.

]]> http://allthingsd.com/20130123/cisco-acquires-israels-intucell-for-475-million/feed/ 0 http://allthingsd.com/20130111/cisco-sued-for-trademark-infringement-over-marketing-slogan/ http://allthingsd.com/20130111/cisco-sued-for-trademark-infringement-over-marketing-slogan/#comments Fri, 11 Jan 2013 14:54:30 +0000 Arik Hesseldahl http://allthingsd.com/?p=284573 Late last year, networking giant Cisco Systems had big plans. Having suffered through a gut-wrenching round of layoffs and restructuring moves meant to get the company back in fighting trim after a few years of bloat, 2013 was to be a year of new beginnings.

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.

]]> http://allthingsd.com/20130111/cisco-sued-for-trademark-infringement-over-marketing-slogan/feed/ 0 http://allthingsd.com/20121210/cisco-aims-to-wake-up-sleepy-brand-with-new-campaign/ http://allthingsd.com/20121210/cisco-aims-to-wake-up-sleepy-brand-with-new-campaign/#comments Mon, 10 Dec 2012 15:00:57 +0000 Arik Hesseldahl http://allthingsd.com/?p=276349 Having spent the better part of two years re-inventing and re-sizing itself through layoffs, restructurings and acquisitions, networking giant Cisco Systems has throughout the process struggled to explain itself to the world. No one is quite sure what kind of company it intends to be, and it’s not entirely clear that Cisco itself really knows.

The company intends to change that, at least in one fashion, with the launch of a significant branding campaign combining broadcast, print, Web, social and augmented reality that gets under way today and should run well into next year. CEO John Chambers previewed the “Tomorrow Starts Here” Now campaign at Cisco’s annual meeting with financial analysts in New York on Friday.

The idea appears to be to make networking instead of computing the most important part in the narrative of the Internet’s next phase in growth and evolution. For years, computing has seemed the central player in the march of technology of which the Internet is the logical end result.

Cisco has cleverly attempted to hijack and then enhance the tired-out phrase “Internet of Things,” and has changed it to “Internet of Everything,” implying that everything worth knowing anything about, from traffic lights to trees, will be connected to the Internet in some fashion.

The new campaign — a broadcast spot can be seen below — was created by advertising agency Goodby Silverstein & Partners, whose clients include Yahoo, Netflix and TD Ameritrade. It’s also known for doing some high-concept tech ads, like this spot for Sprint connecting 4G cell phones to the wheel, the first supersonic flight and other great scientific firsts in history.

I talked to Cisco’s chief marketing officer, Blair Christie. She said it’s kind of a culmination of a year-long effort to rethink the Cisco brand. You saw some of it earlier this year with bits like the “broken robot” ad, in which a manufacturing robot breaks down, but then gets fixed by another robot, thus allowing the assembly line to “fix itself.”

“From a marketing perspective, the story has shifted toward the value of connections,” Christie told me in an interview last week.

The piece that will get the most attention is the “augmented reality” part, which harnesses an iPhone app that allows people seeing print versions of the campaign to drill down and get to know Cisco more. You can, depending on how you navigate through the app, see several videos or download some white papers. The point, Christie says, is that Cisco is a complex company, and even the masters of the advertising industry can’t tell the whole thing in 60 seconds. More about it and the rest of the campaign here.

Anyway, here’s the video part that I can show you. That Cisco is taking the initiative in seeking to tell its own story better is a good sign. It has suffered of late from the appearance of being an older company that has lost a lot of its mojo. We’ll see if this can help get some of it back.

]]> http://allthingsd.com/20121210/cisco-aims-to-wake-up-sleepy-brand-with-new-campaign/feed/ 0 http://allthingsd.com/20121130/syrian-internet-outage-raises-question-could-it-happen-here/ http://allthingsd.com/20121130/syrian-internet-outage-raises-question-could-it-happen-here/#comments Fri, 30 Nov 2012 20:05:50 +0000 Arik Hesseldahl http://allthingsd.com/?p=274175 Syria disappeared from the Internet yesterday. Everyone knows that by now. But one fact that didn’t resonate quite as readily in the first reports is how quickly it happened. At the order of someone — presumably an official within the government of President Bashar al-Assad — an entire nation’s communications infrastructure ceased to function within about four minutes.

When you remember the basic fundamental truths about the Internet — the part about how it was designed to be used in the event of a nuclear war and thus has redundancy and survivability in mind — one can’t help but wonder how such a thing could happen.

It comes down to control, and creating a single, easily accessible choke point run by loyal people. Every single Internet connection in Syria is funneled through a single government agency that authorizes them all — the Syrian Telecommunications Establishment — and indeed all of them are run out of the same building.

Today, the folks at Renesys, who were the first to notice Syria’s government-ordered outage (for it could be nothing other than that), have tackled the question of how readily what has happened in Syria — and in Libya and Egypt before it — could happen in other countries.

Here’s its map. Countries where there’s a significant risk — speaking logistically, not necessarily politically — of a government-ordered shutdown are shown in darker green. The lighter the green, the lower the risk.

Renesys, in its corporate blog, breaks it down like this:

If a country has more than 40 companies providing Internet infrastructure at its international border, it is categorized as “resistant,” meaning that it would be difficult if not impossible under whatever circumstances for anyone to order a coordinated takedown of the Internet. There are simply too many moving parts to make it a realistic worry. The good news is that much of the world is in this category, including the U.S., Canada, most of Europe and Russia.

There are two other categories where the risk incrementally increases — infamously authoritarian China is notably in the “low risk” category — and the last one is “severe risk.” This one includes 61 different countries, and Syria is one, where there are only one or two companies providing Internet infrastructure at the international border. No surprise this group includes places where there has been a lot of political turmoil in the last year: Tunisia, Algeria, Turkmenistan, Libya and Yemen, but also the usual suspects among the world’s harsher dictatorships: Cuba and North Korea. Another notable member of this club is Myanmar (a.k.a. Burma), which has recently been opening up, (President Obama visited there last week) but which actually did pull the Internet plug in 2007.

Meanwhile, the Internet remains off in Syria. Google has restarted its @Speak2Tweet Twitter account, that allows people to call a number and leave voice messages via Twitter. I have no idea if the person in the message below is actually in Syria, but if he is, his message is especially heart-breaking.

voice-to-tweet : http://t.co/Nw8JB3fj

November 30, 2012 7:13 am via SayNowReplyRetweetFavorite

@speak2tweet

Speak To Tweet

Here is a National Public Radio Story about all this. It mentions, almost in passing, some computers with satellite connections that have been given to members of the Syrian opposition by the U.S. Department of State. I’m going to try to learn more about them next.

]]> http://allthingsd.com/20121130/syrian-internet-outage-raises-question-could-it-happen-here/feed/ 0 http://allthingsd.com/20121129/syrias-throwing-of-the-internet-kill-switch-raises-lots-of-questions/ http://allthingsd.com/20121129/syrias-throwing-of-the-internet-kill-switch-raises-lots-of-questions/#comments Thu, 29 Nov 2012 23:14:47 +0000 Arik Hesseldahl http://allthingsd.com/?p=273860 Syria’s Internet infrastructure remains almost entirely dark today. Almost.

The folks at Renesys, who were the first to notice that something was amiss with the telecom infrastructure of the war-torn Middle Eastern nation, have been hard at work sifting through their data — and they’ve found something interesting.

At least five networks operating outside Syria, but still operating within Syrian-registered IP address spaces, are still working, and are apparently controlled by India’s Tata Communications.

These same networks, Renesys says, have some servers running on them that were implicated in an attempt to deliver Trojans and other malware to Syrian activists. The payload was a fake “Skype Encryption Tool” — which is, on its face, kind of silly, because Skype itself is already encrypted to some degree — that was actually a spying tool. The Electronic Frontier Foundation covered the attempted cyber attack at the time.

Cloudflare has also been monitoring the situation in Syria and has made a few interesting observations.

First, pretty much all Internet access in the country is funneled through one point: The state-run, state-controlled Syrian Telecommunications Establishment. The companies that provide this capacity running into the country are PCCW and Turk Telekom as the primary providers, with Telecom Italia and Tata providing additional capacity.

There are, Cloudflare notes, four physical cables that bring Internet connectivity into Syria. Three of them are undersea cables that land in the coastal city of Tartus. A fourth comes in from Turkey to the north. Cloudflare’s Matt Prince says it’s unlikely that the cables were physically cut.

Cloudflare put together a video of what it looked like watching the changes in the routing tables happen live. It’s less than two minutes long.

For what it’s worth, Syria’s information minister is being quoted in various reports as blaming the opposition for the shutdown.

So the question is: Why now? Clearly, the Syrian regime is under more pressure than ever before. Previously, it tended to view the country’s Internet as a tool to not only get its own word out to the wider world, but also to try and spy on and monitor the activities of the rebels and activists.

With fighting intensifying in and around the capital and the commercial city of Aleppo, the decision to throw the kill switch might indicate a decision to try to disrupt enemy communications. Or it might mask a seriously aggressive military action that it wants to keep as secret as possible. We don’t know yet.

]]> http://allthingsd.com/20121129/syrias-throwing-of-the-internet-kill-switch-raises-lots-of-questions/feed/ 0 http://allthingsd.com/20121129/cisco-keeps-up-acquisition-pace-with-141-million-cariden-buy/ http://allthingsd.com/20121129/cisco-keeps-up-acquisition-pace-with-141-million-cariden-buy/#comments Thu, 29 Nov 2012 14:24:13 +0000 Arik Hesseldahl http://allthingsd.com/?p=273778 Networking giant Cisco Systems said this morning that it will buy Cariden, a maker of software used in the planning, design and engineering of networks. Cisco will pay about $141 million for the privately held company, and the deal will close early next year.

It’s Cisco’s third deal this month. On Nov. 18, it offered $1.2 billion for Wi-Fi concern Meraki, and then followed it up with a $125 million deal for Cloupia.

Cariden has been around since 2001, and specializes in helping service providers optimize the operations of their networks. Customers include Verizon, Deutsche Telecom, SingTel and Swisscom, among others.

Brian Marshall, an analyst with ISI, issued some quick comments on the deal. He says that software for managing networks is going to play an increasingly important role as companies like Cisco start making active moves in the area of software-defined networking. SDN is what all the cool-kid networking companies are into these days, and it basically means that networks can be created on an ad hoc basis almost as easily as virtual machines can be spun up in a data center. Cariden, it turns out, has done some fundamental work on the SDN, and over the summer announced a blueprint for doing SDN-based network infrastructure.

]]> http://allthingsd.com/20121129/cisco-keeps-up-acquisition-pace-with-141-million-cariden-buy/feed/ 0 http://allthingsd.com/20121115/the-good-news-is-dells-enterprise-business-is-growing-then-theres-the-bad-news/ http://allthingsd.com/20121115/the-good-news-is-dells-enterprise-business-is-growing-then-theres-the-bad-news/#comments Fri, 16 Nov 2012 00:20:11 +0000 Arik Hesseldahl http://allthingsd.com/?p=270152 Shares of Dell fell by more than 2 percent after hours as the PC and enterprise tech company reported earnings and sales that fell slightly short of the consensus view of analysts.

It’s not that there wasn’t good news, it’s just that there wasn’t enough of it to outweigh the bad news. Dell, as you know, has been trying to reorient itself away from its core PC business and toward what CEO Michael Dell has described as an end-to-end enterprise IT hardware, software and services company. He’s talked about this strategy numerous times, including once in an interview with AllThingsD, as have several of the executives on his team, including Chief Commercial Officer Steve Felice, Steve Schuckenbrock of Services and Marius Haas and John Swainson, who run Dell’s Enterprise and Software units.

So the good news is that that strategy is at least starting to look like its working, by at least one key metric. See the screen grab from Dell’s slide presentation below:

As you can see, year-on-year sales in Dell’s servers and networking business are up 11 percent, which is good news. And service? Down only 1 percent, which in the current environment is almost as good as holding the line.

Also, Dell said that on a revenue basis, enterprise solutions and services are on their way to collectively reporting $20 billion in annual revenue, which would amount to about 35 percent of its total sales based on the forecast of Wall Street analysts. (The consensus number for Dell’s fiscal year 2013 is $57.4 billion.)

The problem? Well, you can see it in the same slide. Sales of mobile PCs are down 26 percent. And PCs, both mobile and desktop, at $6.6 billion still account for slightly less than half of overall sales. When that much of the business is down, it’s kind of hard to meet expectations. Or as Brian Marshall, an analyst with ISI, put it in a note to clients just issued: “Changing the composition on $55-60 billion of annual revenue at Dell is a non-trivial task requiring many years — not quarters — to be realized.”

]]> http://allthingsd.com/20121115/the-good-news-is-dells-enterprise-business-is-growing-then-theres-the-bad-news/feed/ 0