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pww.comCisco Systems, Inc. Presents at Morgan Stanley 2012 Technology, Media & Telecom Conference, Feb-27-2012 09:30 AM - NasdaqGS:CSCO

NasdaqGS:CSCO

Robert W. Lloyd [Former President of Development & Sales] 💬

Robert W. Lloyd, the Former President of Development & Sales at Cisco Systems, provided insights on several topics during the presentation:

  1. Forward-Looking Statements Disclaimer: Lloyd began by reminding the audience that the discussion might include forward-looking statements and directed them to Cisco's investor relations website for the latest 10-K and 10-Q filings.

  2. Recent Financial Performance:

    • Exceeded expectations in both earnings and revenues.
    • Achieved record earnings per share of 27%.
    • Hit a $1 billion expense reduction target one quarter ahead of schedule.

  3. Business Growth:

    • Switching business grew by 8%.
    • Routing portfolio grew by 8%.
    • SP Video portfolio experienced mid-20s percentage growth.

  4. Challenges:

    • Public sector business was down 1%.
    • Challenges in India due to local dynamics.
    • Challenges in some parts of Europe, particularly Southern Europe.

  5. Channel Partnerships:

    • Over 85% of Cisco's products are sold through channel partners.
    • Emphasized the differentiated engagement with partners and the value they add through service portfolios.
    • Resilience of Cisco's channel against competitive offers based solely on price.

  6. Partnerships and Collaborations:

    • Collaboration with NetApp on integrated technologies for the data center, known as FlexPod.
    • Joint venture with EMC and VMware called VCE, which reached nearly $1 billion in revenue.
    • Work with worldwide systems integrators like Accenture on transformational projects.
    • Efforts in virtual desktop with Citrix and VMware.

  7. Competitive Intensity:

    • Clarified that competitive intensity does not mean increasing discounting.
    • Emphasized competing on value proposition rather than price.
    • Educating sales teams and partners on the advantages of Cisco's technology.

  8. Huawei Competition:

    • Highlighted concerns regarding Huawei's business model, integrity, and reputation.
    • Discussed customer experiences with Huawei infrastructure, noting initial low cost followed by unexpected expenses and lock-in.
    • Emphasized Cisco's focus on innovation, security, and reputation in the context of cloud services.

  9. Service Provider Routing Market:

    • High-end routing portfolio grew by 11%.
    • Significant market share gains in Japan at the expense of competitors.
    • Success with the CRS-1, CRS-3, and ASR 9000 series in the service provider market.

  10. Ericsson Competition:

    • Differentiated Cisco's offerings through an architectural approach that integrates various components for service providers.
    • Noted the importance of revenue generation and integration for service providers.

  11. Data Center Strategy:

    • Selling data center technology primarily on an architectural basis.
    • Achieved significant market share with the unified computing system (UCS).
    • Emphasized the value of an integrated approach in the data center, including software innovations like Fabric Extender.

  12. Gross Margin Management:

    • Targeted gross margin growth through balancing lower-margin technologies like UCS with higher-margin software-based technologies such as collaboration and video.

  13. Large-Scale Data Centers:

    • Addressed the unique needs of large-scale data centers operated by companies like Amazon, Google, and Facebook.
    • Highlighted Cisco's role in providing core network infrastructure for these data centers.

  14. Storage Technology Partnerships:

    • Partnered with market leaders like NetApp and EMC for storage technology.
    • Emphasized the benefits of partnership over ownership unless Cisco can be a top player in the market.

  15. Channel Incentivization:

    • Explained Cisco's value-based channel reward system that focuses on partner investments and specialization capabilities.
    • Highlighted the loyalty and profitability of Cisco's channel partners.

  16. Virtual Desktop Infrastructure (VDI):

    • Described Cisco's approach to integrating network and collaboration technologies for VDI.
    • Emphasized the importance of an intelligent network in delivering a seamless VDI experience.

These points provide a comprehensive overview of Lloyd's presentation, covering financial performance, strategic partnerships, competitive dynamics, and future directions for Cisco.

Sze Wai Chan [Former Senior VP, Chairman of Greater China & Co-Chairman of China Board] 💬

Sze Wai Chan, Former Senior VP, Chairman of Greater China & Co-Chairman of China Board, mentioned:

  • Huawei's business is 70% outside of China, indicating Cisco's need to compete effectively within China.

  • Huawei's initial focus was on optical networking, radio networking, and IP infrastructure, but they aim to enter the enterprise market where Cisco is the leader.

  • Customers who deployed Huawei infrastructure found it less cost-effective over time due to lock-in and on-site engineering costs.

  • Huawei's reputation and integrity are questionable, affecting their ability to recruit channels and maintain customer trust.

  • Huawei lacks a broad technology portfolio, especially in collaboration technology, and faces challenges in cloud-based delivery and security.

  • The Starent mobile infrastructure was chosen by the third-largest mobile operator in the world for their LTE network, despite not being the low-cost provider.

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