By February, the temporary turbulence appeared more permanent. Chambers said that Cisco had entered a “period of transition.” Some transition. First came the unceremonious execution of the Flip videocamera business, a decision which has never — even months later — been fully explained.

Then came the job cuts — 6,500 from Cisco itself; another 5,000 and change were transferred to the Taiwanese manufacturing giant Foxconn. Cisco is now a much lighter operation, yet still on its way to cutting $1 billion in operating expenses.

The results so far speak for themselves. Cisco’s results packed a serious wallop to the expectations of Wall Street analysts, who are falling all over themselves today to upgrade Cisco’s shares.

“An underappreciated turnaround story,” was the phrase Shaw Wu of Sterne Agee chose to describe Cisco in a note to clients today. “Showing tangible evidence that execution has improved,” wrote Brian Marshall for ISI Group. Brian Modoff of Deutsche Bank upgraded Cisco to “buy,” and raised his target price to $22 from $17. So did John Slack at Citigroup, and Todd Koffman at Raymond James. Cisco appears to be “on the right track,” wrote Ittai Kidron of Oppenheimer & Co.

Shares are surging accordingly. As of 10:35 am ET, they’re up by $1, or more than 6 percent, to $18.61. That’s not a full recovery to where it was before this whole drama began a year ago, and yes, it has been painful to get to this point. But it’s a start. The question now is whether Cisco can make it stick.

As I listened to the conference call with analysts yesterday — and watched the stock climb this morning — I kept hearing in my head the song “How You Like Me Now?” by the Heavy. This morning, I thought I’d share it. Enjoy:

The results were better than the consensus expectation of analysts who had called for Cisco to report earnings of 39 cents per share on sales of $11.02 billion. Cisco shares rose 1.5 percent after hours, but fell by more than 4 percent during the regular session, closing down 75 cents at $17.56 price.

In a company statement, CEO John Chambers called the results a “a solid quarter,” and went on:

“We’ve completed the majority of our restructuring and have organized Cisco to successfully execute against our strategy of providing intelligent networks, architectures and integrated products that solve customers’ business problems. Even in times of limited capital spending, intelligent networks are being deployed to drive new business, revenue and consumption models, enable new customer and employee experiences, and drive efficiencies. Cisco’s leadership in networking, video, collaboration and cloud, offered together in an integrated architectural approach, uniquely positions Cisco as a strategic business partner.”

Cash flow from operations was $2.3 billion compared with $1.7 billion for the first quarter of fiscal 2011. On a conference call with analysts, Chambers said orders for products grew 13 percent. Gross margin in the quarter was 62.4 percent.

Cisco exited the quarter with combined cash, cash equivalents and investments worth $44.4 billion, down slightly compared with $44.6 billion at the end of fiscal 2011. The company used $1.5 billion of its cash to buy back 100 million shares at an average price of $15.37 per share.

Cisco CFO Frank Calderoni said the company expects revenue in the second quarter in the range of $11.14 billion to $11.24 billion. This is slightly higher than the consensus expectation of $11.13 billion, which would represent revenue growth of about 7 to 8 percent. Per-share earnings will be 42 cents to 44 cents slightly ahead of the street, which is at 42 cents. Calderoni said Cisco expects to see a gross margin of between 61.5 percent and 62 percent. This includes $100 million worth of expected restructuring charges.

Update: So where were the strengths and weaknesses? The cloud for one thing. For one Cisco’s Cloud business where orders grew an eye-popping 122 percent. This is the business where Cisco is taking on bigger companies like Hewlett-Packard and Dell in supplying compute infrastructure for data centers. Its product here is the Universal Computing System that it jointly runs with VMWare and EMC. Cisco’s revenue here is up 116 percent. Nice growth indeed, but as a percentage of revenue, it was pretty small in the quarter, amounting to just a hair above 2 percent. Still, Cisco added 1,572 new customers to its growing stable of UCS customers, which now numbers nearly 9,000.

Collaboration, which includes the video and TelePresence business saw orders grow 16 percent and revenue grow 12 percent in the quarter. This is a much bigger business, and amounted to more than $1 billion or nearly 10 percent of sales.

On the , Chambers, in response to a question about the strength of the financial sector said Cisco is working with a “very very large financial company,” that he would not name, though it is a US company. “We’re aligning at the hip,” Chambers said, in how the company — it sounded like a big retail bank or investment house given the way he described it — collaborates with its financial advisers and its branch locations.

Usually these deals are done with a lot of secrecy. Banks don’t like other banks knowing whose gear they’re using lest they give away a competitive secret, but Chambers is clearly bursting at the seams to talk about it, and if its a big enough deal, perhaps we’ll learn who its with soon.

So is Cisco on the road to the turnaround it has been promising since missing earnings expectations badly in February? Maybe so, says Stifel Nicolaus analyst Sanjiv Wadhwani in a note to clients. He says he expects Cisco to slightly beat guidance that has sales in the range of $10.86 billion to $11.18 billion, which would amount to growth of between one and four percent.

Wadwhani says checks with Cisco resellers show an improvement in pricing versus the year-ago period, though it’s hard to know whether that’s temporary. Hewlett-Packard’s networking business may be exerting less pressure on Cisco because of its own recent corporate drama.

Additionally, the product transition in the switching business that Chambers had blamed for many of Cisco’s earnings difficulties in prior quarters appears to be largely completed, Wadhwani says — which means business will not be the drag on results that it has been in recent quarters. “Overall, we believe that switching performed in line to slightly better versus expectations.”

Also performing better than expected, he says, is Cisco’s routing business, in which it has been taking share away from Juniper both in the core and edge routing businesses.

The consensus of analysts calls for Cisco to report earnings of 39 cents on sales of $11.02 billion. Wadhwani rates it a buy with a target price of $20. That would get it close to the $20.23 its shares traded at the end of 2010. With Cisco trading down 79 cents today — or more than four percent, given the swoon in the wider market — the shares have fallen by more than 13 percent this year.

Now that new HP CEO Meg Whitman has decided to keep the PC business rather than spin it out as her predecessor Léo Apotheker had proposed, HP appears to be heading back, however slowly, toward the kind of stability for which it had long been known.

But can it still perform? Bernstein Research analyst Toni Sacconaghi took the opportunity to examine the company’s business units and finds that, yes, the prospects for growth aren’t unreasonable. The current portfolio of HP’s business, he estimates, is likely to grow its sales organically by a combined 2.5 percent on an annual basis going forward. Add to that additional growth from the planned shifts toward higher-margin IT service, networking and software businesses, and the picture gets brighter, Sacconaghi writes in a note to clients issued yesterday. HP, he argues, should be able to grow its per-share earnings by 9 to 10 percent annually over the next three to five years.

Part of his assumption is that HP uses about $4 billion of its $8-$10 billion in annual free cash flow for share buybacks, which will help goose earnings on a per-share basis by reducing the number of outstanding shares; plus another $3 billion annually for acquisitions, buying companies at reasonable multiples of about five times revenue.

So how does each sector of HP’s business look?

PCs: Sacconaghi reckons that the global market for PCs will grow about 6 percent a year on a unit basis, down from historical averages of about 10 percent, and that it will grow on a revenue basis by about 2 percent a year through 2015. As the biggest supplier of PCs in the world, HP will, at the very least, hold its market share. While PCs are HP’s largest business, accounting for $40 billion in its last fiscal year and about one-third of its overall sales, the unit generates only 13 percent of operating profits. And, yes, while tablets are a threat, Sacconaghi sees no reason that PCs and tablets can’t grow together. The increasing need for an Internet connection everywhere and the increasing amount that consumers are willing to spend on technology, coupled with price declines over time, mean that consumers will be willing to spend more on notebooks and tablets.

Printers: As with PCs, HP is the market leader in printers, and as that market grows its revenue by about 3 percent a year, HP will probably hold on to its share of the market. Tablets may have a long-term impact on printing behavior, but Sacconaghi argues that consumer behavior tends to change slowly. A decade ago, he says, investors worried that email and the paperless office would kill printing. “Despite these ostensible headwinds, HP and Lexmark collectively grew their supplies revenues by 7 percent per year between 2000 and 2010, driving low to mid single digit growth for the printer industry.” HP’s printer division accounted for $25.8 billion in revenues in the last fiscal year, or about 20 percent overall, and because of its 17 percent operating margin, delivered 29 percent of the company’s profits. It’s a classic razor blade business, as HP loses between 20 and 25 percent on the printing hardware, only to make it up on supplies that command a 60 percent margin. The presence of tablets could actually boost printing, and thus increase the sale of those supplies down the road. Overall, the printer business should continue to grow at about 3 percent a year, Sacconaghi says.

Enterprise, servers, storage and networking: Sacconaghi expects HP to grow revenues in the ESSN unit by about 2 percent a year, slightly below the industry growth rate of 3 percent. He bases this on the expectation that HP can grow its networking business, hold its market share in the Intel-based servers, and lose share in its enterprise storage business to players like EMC and NetApp, and also lose share in the Unix storage business because of Oracle’s decision not to support the Itanium chip.

Services: This unit should grow by about 2 percent annually, slower than the market, which is growing at 4 percent. “We believe that outsourcing is a maturing business, and that EDS, which HP purchased in 2008, is and was an underperforming asset,” Sacconaghi writes. “As a result, we forecast HP’s outsourcing revenues to remain flat.” Expect it to grow in line with the enterprise hardware business, and along with the consulting business.

Software: The market research firm IDC expects the end markets for HP’s software to grow by 7 percent a year. If you assume that HP makes more software acquisitions, which Sacconaghi does, then you can reasonably predict its software revenue will grow by 10 percent a year.

So what’s the risk to all this? Leadership. “Ultimately, our projections for HP are predicated on the company choosing a disciplined financial approach to running the company that includes modest revenue growth, small and leverageable acquisitions, a strong operations focus, and high returns of capital to shareholders,” Sacconaghi writes. The last two CEOs who tried to “transform” HP — Carly Fiorina and Léo Apotheker — failed.

HP’s isn’t “broken,” but in fact offers a favorable risk for patient investors, Sacconaghi says. He rates HP shares as an “outperform,” with a price target of $37.

11:39 am: A few introductory remarks, and Ina Fried welcomes Roese to the AsiaD stage.

Ina Fried: Hi again, everyone. I’m very excited that our next speaker is John Roese of Huawei. Huawei, for those of you who don’t know — I’m sure everyone in this room does — is, you know, a huge Chinese networking giant involved in all kinds of areas, from making devices, making the networks that devices run on, and has quietly, over the last many years, amassed just a huge talent pool, not just here in Asia, but also in the United States. And John Roese oversees the U.S. R&D arm, which I actually didn’t realize is composed of as many thousands of engineers as it is. John also has an interesting career as CEO of Nortel, and several other technology companies before that. So, without further ado, John Roese.

Maybe, I think, John, the most helpful thing would be to talk first a little bit just about Huawei and what are the businesses it’s in.

John Roese: Most importantly, everybody knows that Huawei is a telecom company selling things to carriers. But this year the company has gone through a complete transformation to become an ICT company, and it’s based on the premise that in the future, most problems will not be solved purely by the consumer, the carrier, or the enterprise ecosystem. You actually have to combine the technologies from them to solve problems.

And so while we had a big carrier business and continue to be currently the second-largest carrier company in the world, in terms of equipment suppliers we quietly have emerged as a consumer company with a multibillion dollar consumer company in the handset business, and now have entered the market as an enterprise player with … about $4 billion in enterprise sales, which makes us probably the second or third largest in the world.

So the company is redefining itself on a premise that the future is not about distinct silos of technology, but how you put them together in a coherent way to actually solve more complex problems in this next generation of ICT.

Ina Fried: So everything’s all related, but let’s break it into silos for a second. What are the different products you guys make? You have networking — both, I think, wired and wireless — although carriers are certainly what you’re best known for. You guys make phones and tablets which have been less in the U.S. but starting to show up first, I think, through smaller carriers and now through some of the major carriers. What other kinds of products do you make?

John Roese: To put it into context, my role in the U.S., I’m responsible for advanced technology across all of the business lines. And I kind of joke with people that, in just my organization, you can go from dealing with people developing photovoltaic technology, to cloud technology, to next-generation cellular technology, to enterprise switches and routers, to core optical networks, to handsets and tablets and smartphones. It’s really the entire spectrum, and it’s probably one of the broadest toolkits of any company in the industry, in terms of providing the communication infrastructure for — everything. It’s a strange answer, but if there’s a way to communicate, there is probably Huawei technology involved in that communication ecosystem.

Ina Fried: And let’s talk about the organization you oversee. First of all, explain to people the scale. Because I certainly didn’t have an appreciation for just how many people Huawei had in the U.S. And talk about what they’re doing.

John Roese: So, obviously, over the years Huawei has gone from out-executing a lot of people in front of us to now out-innovating and being the leader in many segments. We’re now the market share leader and the innovation leader. And as part of that, we realized we had to operate globally. We had to create a global ecosystem of innovation. The biggest change in that was this conscious decision to expand our innovation organization worldwide.

So my charter was to come in and essentially scale the North American organization from a few hundred people to well over a thousand people now, that are all chief scientists, chief technology officers. The average seniority in my organization, from an engineering perspective, is probably 25 to 30 years in the industry, these deep, deep experts that, quite frankly, have created many of the industries that we’re dealing with, in terms of technology. So that thousand-plus people that’s emerged over the last year is the tip of an arrow that, behind it, is today approaching almost 60,000 engineers around the world, many of them in India and Europe, and a huge portion of them in Shenzhen, Beijing and other provinces in China.

Ina Fried: So, 60,000 engineers — some huge percentage of the company’s overall workforce — are actually engineers.

John Roese: Absolutely. As a technical guy, and having been an executive of many companies, one of the things that attracted me to Huawei was it’s still a very technical company. Almost 50 percent of the company is R&D. There are very few companies that have this kind of emphasis on the development of technology, as opposed to other aspects of the business.

Ina Fried: And how did you build this workforce in the U.S.? You’re in many sites in the U.S. and Canada; um, from what I recall, you’ve basically cherry-picked some of the companies on the downturn and grew that way.

John Roese: I answered that question to some folks in the U.S. government; they asked the same question about how, isn’t it challenging to attract people? It was kind of an interesting conversation. I answered it, “One person at a time.” We candidly looked at where innovation was happening and tried to make sure that we had a presence close by, so we could tap into those ecosystems if you want to do advanced terminals, smartphones, tablets. A great place to do that is San Diego.

So we opened a big facility in San Diego. If you want to do cellular wireless — Chicago; Ottawa; Bridgewater, N.J. — great places to do that. Our biggest sites are actually in Santa Clara, where you have this — ecosystem where you can almost find any technology within about three miles of our facility. So it was a very conscious decision to say that there are clusters of intellect within the North American market, and instead of trying to assume that you can bring them to you, it was better for us to go to them and attract them into the organization.

Ina Fried: And I understand that you guys — your chief recruiter — you owe a big debt to Larry Ellison?

John Roese: Well, we actually kind of find it very useful when there’s mergers and acquisitions and consolidations. So when Sun and Oracle combined, we found a lot of people at Sun that basically wanted to rethink where they wanted to work. Sun is a fantastically innovative company, as is Oracle, but the cultures are different. So it was a great boon to us that we were able to be down the street, and be growing very rapidly, and have this idea where people could take their ideas and turn it into actual reality. By the way, we did the same thing up at Ottawa. When Nortel kind of disappeared, one of the things that happened very quickly, en masse, some of the top technical experts in Nortel just kind of walked across the street to a new facility while they opened, and joined the company.

Ina Fried: And that’s how you came to the company, right?

John Roese: Well, I was a little bit later than that. Actually, that team, most of them who worked for me came into Huawei, and then I was kind of off doing other things, and then as we decided to scale it, I guess they gave me a good reference and they say, “Well you should go attract this guy because we liked working for him, he built a good innovation culture and maybe can help you take it to the next level.”

Ina Fried: And talk about that: What was your thinking, how well did you know Huawei when they first approached you? I mean, obviously, some of your former workers were there. What were your concerns? What excited you about it?

John Roese: Well, I think most people, to quote my former neighbor up in Ottawa, the mayor of Ottawa — Larry O’Brien, at the time — he opened the R&D facility for us up there, and his comment was, “Huawei is the largest company I’ve never heard of.” And that was very common in our engagements. And for me personally, I knew about Huawei, I had competed with them, I even tested their technology to prove whether or not it worked and whether it was a real threat, and learned very quickly it was a very real threat to companies like Nortel. But for me personally, I had kind of checked out of the industry after Nortel. I said, four Fortune 500 CTO roles, it’s time to go do something else, I’ll go to that Ph.D. in cultural anthropology.

But then I started talking to Huawei. I saw some of my best and brightest people — people that were Nortel fellows — come into the company, and as I got talking to them, when I came over to SenJen, when I met with the management team, when I met with the folks that were running the company, what I realized is, this is one of those companies that actually truly values technology; understands that you have to invest heavily into it and was genuinely excited about, not what happened yesterday, but what was going to go in the future. For me, as a technologist — every technologist, any engineer — the most valuable thing you can do is take an idea and turn it into reality. It’s not about making money, it’s not about prestige, it’s about turning your ideas into reality. When I saw this engine here, and this desire to innovate into the future, it was just a complete no-brainer to join.

Ina Fried: Now, you talked about building your organization one person at a time, and part of the reason why Huawei has built its organization in the U.S. one person at a time is because the U.S. government won’t let you acquire just about anyone. You guys have tried a couple times. How challenging is that, in a technology industry that is largely built by acquisition? You came from Broadcom; they gobble up a dozen companies a year.

John Roese: No one will accuse government policy of preceding the technical ecosystems and industries. It usually is a couple generations behind. So the current status of our relationship with the U.S. government is really that we’re a bit out of sync. In most of the industries that we compete in right now, the industries have been highly globalized. If you wanted to build a wireless network today in the U.S., your choice of vendors would be, let’s see, a Swedish vendor, a Finnish vendor, a French vendor and two Chinese vendors. Those are the tier-ones. There’s no North American vendor that can build that for you. The last one was Nortel; it’s not there anymore.

So part of our challenge is educating the U.S. government, educating the politicians. And not just the U.S. — around the world — that we’re in a highly globalized environment, the innovation has shifted, the structure of the industry has shifted and there needs to be a rethinking of how public policy and governmental policy relates to understanding a technology and its application and networks.

Today we build the networks for 45 of the top 50 operators in the world. The remaining five, a chunk of them, happen to be in the U.S. And so we’re very patient. Candidly, we’re now engaging very heavily, we’re dispelling myths on a regular basis, and it does make my life a lot more difficult. In fact, some of the U.S. government people made that comment. They said, “We applaud what you’re doing because you’re hiring lots of people in the U.S.” And we’re exporting $6 billion of goods and services into our global supply chain out of the U.S., we’re a great corporate citizen. But we kind of have to get in sync between the public policy and the actual reality of the industry.

Ina Fried: And what do you think it is? Because, I mean, you mention all of your competitors are global, non-U.S. based companies, is it xenophobia, what is really fueling this fear, and are any of the concerns legitimate or are they all fear-based?

John Roese: Well, I think I would say none of the concerns are legitimate in the reality, but perception is sometimes reality in people’s minds. So the punch line is, some people still think the industry that we exist in is the Bell Labs and the Lucents of the past. So, again, we do have to educate them about this future. The second is an unknown. My comment about Larry O’Brien — I mean, the biggest company he’s never heard of. Well, if I went and polled people in Washington, every senator and congressman, and asked them, “Do you even know how to pronounce Huawei?” — the answer would be, probably not. So we have to engage.

There’s an interesting thing: It’s a $30 billion company; our definition of an emerging market is the United States. So when a U.S. company comes into China, there’s a big educational process to kind of convince people that the company is legitimate, it can provide goo technology, it can be a good partner. And so it’s really just a systematic process of getting them to understand the reality. It doesn’t hurt now that we have a highly globalized workforce, that we have a big presence in the U.S., that we’re not in front of them and dialoging and being present. But more important, the thing that will ultimately overcome this is innovation. There is — you can prevent or avoid certain companies, until the technology they develop is so far superior to what you have at your disposal currently, that it creates a competitive disadvantage. And we believe, given our investment in innovation, that we are almost at that point. In many places ,we are clearly out innovating our competitors, and it just is sound public policy to let the carrier infrastructure of the United States — or the terminal industry or the enterprise industry– use the best technology to solve the best problem, because the correlation between global development, economic advancement, user experience, is entirely tied to using the best technology.

If I told you you couldn’t use any state-of-the-art tablet because I didn’t like the country of origin, and you had to go back to using a typewriter, would you do it? Of course not. We’re not quite there yet, but I think that will occur.

Ina Fried: So I want to turn to one of the topics that’s near and dear to my heart — and certainly to much of the audience — which is this mobile revolution. You guys are playing in that in several areas. You’re building, as you mentioned, the gear that a lot of these networks run on. Perhaps not the ones that I get to use in the States, but a lot of the other networks that I use when I travel, as well as, increasingly, some of the devices. And one of the areas that Huawei and ZTE and a number of Asian companies are making huge influences, democratizing these smartphones. Can you talk about the world you guys see, with smartphones everywhere on the planet?

John Roese: Absolutely. We’ve been through this before. A long time ago, Huawei decided that cellular technology — mobility — should be everywhere. And at that time, most of the big players said it wasn’t cost effective to build cellular networks that could be deployed in sub-Saharan Africa or in the developing world. Huawei was one of the few companies that said, “No, no, no — we need to figure out how to do this.” The result was skipping of generations, massive penetration, and today we have a couple billion people sitting on our networks, which is a good step.

Now we’re in a different phase. The different phase is now that you have these mobile networks, there is still a bit of a have-and-have-not world, and that is the smartphone versus the feature phone. I think the day before yesterday somebody mentioned, “Would it be great if there was $100 smartphone, or something better than that”? Well, there is, we build them. In fact, in the U.S. right now, you could go purchase — there are commercials on television from some of the tier-two operators. They’re our customers that essentially are describing $29 Android smartphones, Huawei-branded, no contract, no commitment.

Ina Fried: Now, does that mean you’re building a phone that costs less than $29 to make?

John Roese: Well, the economics are slightly different and more complex, but clearly they’re in that strata of the sub-$100 smart phone. The advantage of that is, once you get rid of this concept of feature phone/smartphone, that everybody has a mobile broadband device, everybody has a media-capable device — think about the capability that can unlock. I mean, I think Vice President Gore mentioned this concept of five billion people on mobile networks, and less than one billion on smartphones. Well, as soon as everybody is on smartphones, every interesting piece of technology you saw here over the last couple of days is contingent on having an interface that can actually do media, can do data, can be fully interactive. There is a huge opportunity, and the democratization of smartphones — which is clearly our message — we are absolutely trying to make sure that wherever there is a mobile user, they are a fully featured mobile user. That has a huge, profound impact; not just on the mobile networks and the devices, but all of these very interesting, over-the-top applications, cloud services and other things that are contingent on a better terminal and a better mobile experience.

Ina Fried: That growth you mentioned is also contingent, of course, on having networks that can handle that capacity; having enough spectrum. How much time does your organization spend looking at solutions? It’s great to say, wouldn’t it be great if the whole world has smartphones. I think we’d have a problem if any country went to 100% penetration. Data networks are struggling today. How much of your time is spent looking at that issue, and what are some of the things you guys are looking at?

John Roese: A huge portion. I mean, the good news is, I did a calculation a couple of years ago to say, how well have we executed as an industry in improving the bandwidth efficiency of networks — and this was wireline networks. But over a 20-year period, we had improved the cost-per-bit ratio by 22 million to one. That’s a pretty good ratio, if you will. We are very good, as an industry, at figuring out ways to increase the available bandwidth. Now the challenge is, it gets a lot harder when you have to deal with laws of physics, when you deal with things like Shannon’s Law and channel bandwidth. And so we are spending a huge amount of time. Given the composition of my organizations and the people in the organizations I run, they’re all advanced technologists and they’re the place where we are exploring not just how to make it more spectrally efficient, but how do we architect the cellular network. Instead of having these big monster cell sites all over the place, move to heterogeneous networks that have multiple tiers and multiple devices and ways to access, different kinds of networks to interface with, spread the spectrum over multiple spectrum channels.

At the same time, we go and lobby very heavily to get the digital dividend, free up spectrum, increase spectrum. That’s a very precious commodity. But more importantly, think about ways to use that spectrum efficiently. Now, most people don’t understand that a lot of the inefficiency in the network is based on the way it’s designed, and the fact that things like the modulation rate degrades as you move away from the cell site. If you can fix that, then the efficient use of spectrum can improve dramatically. Those are the kinds of things that we keep working on.

I actually have a very high degree of confidence that, contrary to public belief, we’re going to run out of capacity on the cellular networks. I think our industry is actually quite good at figuring out ways, creative ways, of improving that cost per bit of the available spectrum or the available capacity of the network. Occasionally we hit a wall, but usually we figure out a way around it. We innovate, we come up with a new approach and we continue to provide that kind of foundational attribute, which is capacity for people to connect.

Ina Fried: I want to get to questions in just a second, so definitely be thinking of them. But since a lot of people don’t know Huawei, and don’t know what you guys do, take us through the labs. What are some of the coolest projects that you can talk about, that you guys are working on? What are the things that you could tell your cousin, and they’d be like, “Wow?”

John Roese: Yeah, absolutely. So, one of the most interesting ones that I’m really excited about is cloud. So everybody knows the term “cloud”; the problem is, it’s kind of cloudy — we don’t actually know what it really defines. But right now, there’s kind of two schools of thought about cloud. There’s this idea that cloud is just a virtualized data center, and it doesn’t really change much; it just makes things slightly more efficient. And then there’s this very disruptive model that people like Amazon and Google have been focused on, which is, let’s just rethink things like storage and compute and really change the economics so that we can kind of give storage away for free and make it up on advertising. So they had to really rethink how the world was created, in terms of some very foundational components like storage and compute.

So we have a huge amount of projects. I think today we have almost 2,500 engineers across Huawei working on cloud-based projects; which, by the way, is bigger than the total R&D staff of most of our competitors in many markets. But most importantly what we have to acknowledge is, the thing that we have to build is not just a minor iteration of the historical data center, but we have to actually take what people like Amazon and Google philosophically have created, which is a radical rethinking of storage and computing, and turn that into commercial offerings.

We are just about to start trialing and putting out technology to show some of these technologies. But imagine an environment where the cost of storage could be one-tenth what it is today. And you do that by delayering and stripping out a ton of technology so that it’s just very simple architecture, very well-architected and orchestrated. If you change the cost of storage fundamentally for a carrier or for a consumer, for an enterprise, what is the implication of that? Everything. You could change your business model; you can no longer worry about, you only get one gigabyte of storage for your email or don’t make those big files because I don’t have anywhere to put them or be concerned about the cost of those hard drives, or the backup is too complex. If you can get rid of all of that by just changing this fundamental component of the cost of storage, it cascades through every one of these ICT ecosystems. So we call that single cloud, it’s a piece of our overall cloud architecture; and, candidly, I think it’s going to be one of these very big disruptions in the overall industry. Beyond that, obviously we’re doing stuff in everything you could imagine, next-generation wireless. Imagine, if you’ve played with an LTE network today, it’s pretty exciting. A 30-millisecond round-trip time, a 20-30 megabit per second of realistic bandwidth; the theoreticals are much higher. The stuff we’re working on pushed the envelope up to hundreds of megabits or gigabits per second over the wireless environment.

Now, it’s hard to say what you do with that. But I have no doubt that creative people will find a very interesting thing to do with gigabit wireless.

Ina Fried: Really fast dropped calls.

John Roese: Well, it’s funny, I was just at MIT last week, and they were showing me holographic video. I asked them a simple question: How much bandwidth does this take? And they said, “Well, basically it’s the equivalent of a whole bunch of high-definition channels combined to create this three-dimensional, high-definition visualization.” So they were talking hundreds of megs or gigabits of capacity to do holographic video. We think holographs are kind of neat, and they’re interesting. I’ve heard it come up a couple times in the last couple of days. But to move that over a network, we’re going to have to rethink and redesign the networks, which might be one of those first applications, but even if that isn’t the one, I have no doubt people will figure out what to do with it.

Ina Fried: Even making Netflix cost-effective. I mean, their pure data shows that right now we’re not in that place where it’s really you can get Netflix for $7.99 a month, but the cost of delivering a movie is approaching that same rate.

Moving on now to the Q&A with the audience …

Q: On this topic of spectrum and bandwidth, we actually had Mr. Gore here mention that one of the main challenges that the networks are facing is video delivery, broadband delivery; this is definitely one of the drivers. And if that’s an issue not only over typical wired networks, it is only more an issue if every single one of us started to want to stream video or these other high-bandwidth applications over the networks. It’s a significant challenge, which as I understand it, faces two very serious walls, which you’ve alluded to. One is the physics itself. And the second is a political wall. As an example, in Europe, one of the issues is you have a lot of small countries and space; they have to divide the spectrum in ways that are actually very, very inefficient and leave very little spectrum for a given country. So my question is, is this actually really a technical problem, or is it more of a political problem that needs to be solved, that will allow us to get that kind of bandwidth necessary?

John Roese: Yeah, well it’s a great question. I mean, the bottom line is, yes, there’s clearly a political piece to the equation. If you carve up spectrum in funny ways, or you decide that it can only be used in certain ways — like frequency division duplexing versus time division duplexing — these create an unnatural burden. Spectrum is a spectrum; it’s just a segment of the airwaves. We’d like to see a little more rational spectrum policy. Clearly it’s improving, and people I think, now — definitely the FCC, and around the world — are really thinking about how to free up spectrum. But it just takes quite a long time to actually accomplish that. But don’t underestimate the technical problem. There is clearly a technical problem that needs to be solved. You cannot take a network that was historically designed to move very low-bit-rate voice calls, GSM and SMS, and suddenly assume it can be an ultrabroadband wireless delivery vehicle for high-definition video, without really rethinking not just how you do things like modulation on the cellular side, but also how you design the network. And so, that heterogenous networking model, which I think is where most of the action is going to be for the next several years, starts to say, well maybe we should redesign the way the network works. Instead of having one tier, let’s have two tiers, let’s have small cells, let’s spectrum up in the 5- and 6GHz range in coordination with 700 megahertz spectrum.

Imagine a device, five years from now, that’s always connected over a 700MHz channel. So it’s got long range, great building penetration, it’s kind of the control channel — that’s where the important stuff flows. But it’s seamlessly able to invoke additional radios when it’s nearby a small cell, that gives it 100MHz wide channel, 4×4 MIMO, so it has a gigabit of capacity potentially to consume video. So those are all theoretically possible. There are technologies that can be built that way, but the design of the network is very different. It means that now you have to start putting those small cells somewhere; you have to decide that it’s okay to put them on light poles or on building walls, and if we have to have a permitting process that says it takes six months and $10,000 per site to get the permit to hang something on a light pole that just is a small cell in the second tier, that’s just not going to work. So you’re absolutely right, both are important pieces of the equation, both are resolvable, but if you just solve one without the other, it probably isn’t going to get us there.

Q: I have a question about Huawei and potential market share and mindshare in the U.S. One thing that I found really disrupting recently was, Google has shifted Chromebooks with an allocation of Verizon data for free each month. And I think that model is — it’s an incredible model, and I think if you were to put it on lower in phones, you could get people to dig in to this data so that they would see the value of it and want to purchase it, but it’s hardly anywhere. I’m just wondering if you have tried this in any markets around the world, and if you think that this might be something that would be disruptive enough to get traction in America? Because there’s no one offering that.

Ina Fried: So the drug-dealer model — the first hit is free. [laughter]

John Roese: Yeah, we’d rather not use that analogy, but generally it’s not us that are going to create that model, in the sense that it’s the carrier that ultimately has to decide what makes economic sense. Now, the good news is that carriers are now more and more engaged with us saying — they used to think of Hauwei as kind of a supplier of technology that kind of kept the other suppliers honest. That’s when we were in the fast-follower mode. Now that we’re the innovator, the dialogue we’re having with customers is fascinating. So I think you’re on to something, and I think that there are markets where the carriers are looking for ways to increase the penetration rate. And I think now Huawei has an opportunity to actually describe new business models, and the carriers are much more willing to listen to us, because they view us more as an innovator. So I haven’t had that discussion especially, but I’m pretty much, on a weekly basis, sitting down with either CEOs or CTOs or the operators.So maybe the next one, I’ll bounce it off of them and see what they say. I think it’s a great idea, and there’s many other examples in the enterprise world where we’ve done that as an industry and it has worked really well. Get people excited.

Cloud storage is a great example. Give them the first 20 Gb, and see what happens. If they like it, they’ll buy more.That’s what Picasa does, that’s what many of these systems do. You’re absolutely right, it needs to be applied to other markets.

Q: I have a question about your intellectual property strategy. Traditionally, IP is still a little bit of a stigma over here, especially in China. But Huawei has a very impressive IP strategy, so I want to know how it is received internationally, and how it compares to when you were at other international companies.

John Roese: I think you’re absolutely right. The perception is that intellectual property isn’t important. Some companies historically — Huawei, seven or eight years ago — said, no, this is really important. And in the last couple of years we’ve been in the top five intellectual property producers in the world, in all industries — a couple of the years we were, I think, number two. Today we have about 50,000 patents PCTs and patent applications globally. So, my — to answer your question very briefly, compared to Western companies I’ve been CTO of, in fact the patent portfolio is larger and the discipline and desire to create it and the willingness to invest in it is absolutely higher in Huawei. They get it, they understand it and I think realize that intellectual property is a critical part of actually being able to compete in the global marketplace.

Q: It seems like on the one hand you have Moore’s law, giving us faster and faster devices capable of consuming bandwidth, and new business models springing up to accelerate that consumption. On the other hand, you have networks struggling to provide enough spectra. I’d like the answer of, well, technology is going to find a way, but do you think that a period of just real latency is almost inevitable at this point, and if not, do you see solutions coming from outside the network world, like smart flash to do caching, to smooth peak times?

John Roese: Absolutely. The solution to these problems will not be just more bandwidth in the network. That’s a great vehicle. I joke that I’ve been in this industry long enough that we go — we oscillate as an industry between finding really long-term solutions to problems by looking at the end-end ecosystem technically, to moments of time where suddenly the network provides more bandwidth, and we think that you can solve every problem by just throwing bandwidth at it. We’re right now approaching a point in wireless where we can’t just throw bandwidth at it. LT is going to give us a bit of a bump, but it’s a bit more time before we get to LT advanced, and in between there, we will have to get very creative on content management, caching, dynamic transcoding, the intelligence of the endpoint, multi-tiered topologies — those are not cellular problems. And so, you’re absolutely correct, which is great for Huawei, because we actually touch all of those, as opposed to only having one tool to solve the problem.

Q: And do you think that’s going to result in an inevitable period where there’s just going to be a lot of latency?

John Roese: I think it’s going to slow things down in certain markets and certain business models, where the assumption of unlimited bandwidth in all environments is true. But you look over the last 20 years, and it has always gone through those cycles. I’m an optimist, I’ve seen us work through them before. The technical work to solve it when you’re in those “periods of latency” is much more complex. And then eventually we have a breakthrough on bandwidth capacity and everybody kind of breathes a sigh of relief and rapid innovation occurs. And then we do it to ourselves again. It’s inevitable.

John Roese Session Photos

Alan Cohen, Cisco’s vice president for Enterprise and Public Sector, has agreed to join Nicira as its vice president of marketing. Cohen has more than 20 years’ experience in tech marketing and product management. He’s been on Cisco’s team since 2005, when it acquired Airespace, a maker of wireless networking switches, where he was VP of marketing. His resume includes stops at IBM, the old Baby Bell phone company US West, Tahoe Networks, Coopers & Lybrand and the U.S. Department of Energy. He’s a grad of the New York University Stern School of Business and American University.

By my count, Cohen will be the seventh person connected to Cisco in some way to join Nicira’s senior ranks. Nicira, which is backed by a $9 million investment from Andreessen Horowitz and another investment from VMware founder Diane Greene, is working on technology aimed at “virtualizing the network.” Its CEO is Steve Mullaney, a veteran networking executive who has worked at Palo Alto Networks, Shoretel and Cisco Systems. Its CTO and co-founder, Martin Casado, did his Ph.D. on the technology the company plans to bring to market. Its other founders, Nick McKeown and Scott Shenker, are electrical engineering profs at Stanford and Berkeley, respectively.

Cohen’s LinkedIn profile also says he spent nine years as a director of the real estate concern General Growth Properties. He briefly sat on the board of flash memory start-up Violin Memory until Cisco’s archrival Juniper Networks invested in that company earlier this year.

As a Cisco VP, Cohen may have been barred from being a director of a company that Juniper invested in, but now he’ll be working with some Juniper alums. In January, we reported that Nicira had hired Rob Enns, Juniper’s former VP of engineering.

Cisco also did what many analysts have been urging for some months and reduced its long-term growth targets to levels it has a better chance of meeting. It said it now expects revenue to grow annually at 5 to 7 percent through 2014 and called for operating margins in the 25 percent range, which is pretty much in line with what some analysts had suggested.

So were they convinced? A little. John Marchetti of Cowen and Co. called it “a positive analyst day.” The more aggressive stance versus competitors and the realistic targets should give the shares a “boost over the near term,” he wrote in a note to clients today. While Cisco’s valuation, which is at about nine times Marchetti’s forward EPS for the 2012 calendar year, is arguably low, he kept his rating at neutral. “Shares look cheap,” he said, “but we do not see a near-term catalyst to drive the stock higher and believe the muted growth outlook and macro-headwinds especially in light of Cisco’s exposure to government and European customers.”

Sanjiv Wadhwani of Stifel Nicolaus was more convinced. In a note to clients today he wrote that “the worst seems to be behind” Cisco following a product transition in its switching business that was responsible for at least part of its troubles over the last few quarters. Moreover, the pricing environment in switching — which had been driven down in part by an aggressive Hewlett-Packard campaign and profit margins on many of its switching products — are “approaching historical levels.” On top of that, he says Cisco has some moves it can make to trim some operational expense — he called them “opex levers” — to make sure that per-share earnings grow faster than sales. He rates Cisco shares a buy with a $20 price target.

Cisco sees Juniper as being “spread too thin” in the marketplace right now, Wadhwani writes. But Cisco’s line of attack won’t necessarily be lower prices. Indeed, the opposite may be true, he wrote: Cisco “will intensely focus on gross margins going forward.”

But that’s not to say there won’t be other weapons, like marketing trash talk. Here’s a sample: Cisco has launched a site where it accuses Juniper of “overpromising and under-delivering.” If there’s more to come like this — frankly, from both sides — the fight should be fun to watch.

The big maker of networking equipment, which had repeatedly predicted that revenue could grow 12 percent to 17 percent a year, set a new target for annual growth over the next three years of 5 percent to 7 percent.

“We want to be conservative and set realistic goals that we can achieve,” said Frank Calderoni, executive vice president and chief financial officer, during a meeting with financial analysts here.

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Additionally, Chambers (pictured from his interview at D5) will likely lay out his plan to get Cisco growing again, following a restructuring that saw 6,500 jobs eliminated, and certain parts of the company — in particular, the Flip video camera business – shut down.

Financial analysts have been agitating for Cisco to take down its long-term financial models for most of the year, and since they’ll be the ones in the audience today, Chambers would be nuts not to address their concerns. The model may seem like a small detail, but analysts rely upon these forecasts in order to help them calibrate their expectations, and thus help their clients make better investment decisions going forward.

One recent suggestion for how the new model should look came from Gleacher analyst Brian Marshall in a note to clients on Aug. 11. He suggested that Cisco could realistically forecast annual revenue growth of 10 percent and an operating margin of 25 percent. Currently, he says, Cisco’s long-term growth models call for sales to grow annually in the 12 to 17 percent range, with operating margins in the range of 28 to 31 percent. Over the last five calendar years, he wrote, Cisco has averaged revenue growth of 11 percent — worse if you exclude growth from acquisitions — and operating margins just shy of 29 percent.

But it won’t all be numbers and figures today. Alongside the analysts meeting, Cisco will be talking about some new server technology it has developed internally using the UCS computing platform it developed with EMC and VMWare. Cisco has opened up a data center in Raleigh, N.C., that it says is being used for two things — applications development and disaster recovery.

Now, if you don’t know anything about disaster recovery, allow me to explain why that’s a big deal. The typical way companies use disaster recovery is to have a second data center — essentially a carbon copy of the first one that’s used day in and day out — sitting on standby, waiting for the day when it is needed. And while it’s critical to have when the power goes out at your primary site, or some natural disaster like a tornado strikes, it’s also expensive. Disaster recovery hardware sits around doing nothing important, while at the same time racking up costs for power, maintenance and floor space. Wouldn’t it be great if you could use it productively, too?

Cisco has figured out a way to do exactly that, and will demonstrate it today. The data center, which is in Research Triangle Park, has been set up to support application development on a daily basis, but if disaster strikes one of Cisco’s other main data centers — its sites in Texas, for instance — it can be turned around within 24 hours and serve as a disaster recovery site. Oddly, Cisco is demonstrating this mainly as a way of showing off what UCS can do, and it’s also sharing the particulars with customers. It is not, however, offering it as part of a new product or service.

Cisco shares are still trading in the midteens, down from a 52-week high of $24.60 in November. The shares are showing new signs of life, however. Having bounced off the bottom of a 52-week low of $13.30 last month, they’re starting to climb again. And yesterday Cisco rose 54 cents, or more than three percent, to $16.09. Investors seem hopeful that there will be a better outlook from Cisco today.

Hoffman is executive chairman of the business networking company, as well as a prominent angel funder (Facebook early on, for example) and, now, a venture capitalist at Greylock Partners.

In other words, he has a lot of jobs.

Thus, I thought it would be interesting to do a video interview with him at the firm’s Sand Hill Road offices, splitting the interview into three parts.

In the first, he talks about the LinkedIn public offering and where social networking is going. In the second, Hoffman discusses his investing theories, including Greylock’s Discovery Fund for seed investments. And, in the third, Hoffman gives five tips for success for entrepreneurs.

Here’s the videos:

]]> http://allthingsd.com/20110818/reid-hoffman-talks-linkedin-life-as-a-vc-and-gives-five-tips-to-start-ups/feed/ 0 http://allthingsd.com/20110808/recruiters-troll-facebook-for-candidates-they-like/ http://allthingsd.com/20110808/recruiters-troll-facebook-for-candidates-they-like/#comments Mon, 08 Aug 2011 18:29:39 +0000 Joe Light http://allthingsd.com/?p=107193 More companies are trying to tap Facebook Inc.’s 750-million-plus user base to find new employees, threatening traditional job boards and competing with LinkedIn Corp., which has dominated the online professional networking arena.

Facebook’s use as a job-recruitment tool remains small, but its appeal may be growing. Some recruiters say they have all but eliminated their spending on job boards, which can charge a few hundred dollars per job posting, depending on volume. Others note that while LinkedIn contains a more comprehensive résumé database, candidates tend to value referrals from their connections on Facebook more.

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]]> http://allthingsd.com/20110808/recruiters-troll-facebook-for-candidates-they-like/feed/ 0 http://allthingsd.com/20110804/tech-stocks-get-whacked-in-market-downturn-yahoo-and-linkedin-twice-as-hard/ http://allthingsd.com/20110804/tech-stocks-get-whacked-in-market-downturn-yahoo-and-linkedin-twice-as-hard/#comments Fri, 05 Aug 2011 02:48:32 +0000 Kara Swisher http://allthingsd.com/?p=106526

Today’s stock market rout hit tech stocks hard, with most declining as much as the broader indices.

With the Dow Jones Industrial Average down 4.3 percent and Nasdaq off 5.1 percent, shares of Google, Microsoft, AOL and Apple managed to stay in that range of losses.

Not so Yahoo and LinkedIn, whose shares were off 7.8 percent and 9.6 percent, respectively.

LinkedIn, the business networking site which reported its second-quarter earnings today, saw its shares seesaw down and up and down and then up again today.

While its results were in line with Wall Street expectations, the company also created some worry after it said profit margins are going to be cut in half for the next quarter.

Still, after its huge fall earlier today, in after-hours trading, LinkedIn has recovered a bit and is now up five percent.

But Yahoo has continued its increasingly troubling stock drop after the markets closed. Its shares are now dipping below $12, which gives the Silicon Valley Internet giant a very low $15.6 billion valuation.

The company’s stock has dropped 34 percent in the past three months, as worries over a range of issues — from its Asian assets to its display advertising business to its talent drain — continue to be a drag.

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