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pww.comCisco Systems, Inc. Presents at Bank of America Merrill Lynch 2013 Global Technology Conference, Jun-04-2013 01:00 PM - NasdaqGS:CSCO

NasdaqGS:CSCO

Frank A. Calderoni [Former Chief Financial Officer and Executive Vice President] 💬

Frank A. Calderoni, the Former Chief Financial Officer and Executive Vice President of Cisco Systems, Inc., shared the following insights during his presentation:

Opening Remarks

  • Q3 FY '13 Performance: Delivered 5% year-on-year revenue growth and 6% EPS non-GAAP growth.
  • Six Consecutive Quarters: Profits grew faster than revenue for six consecutive quarters.
  • Strategy Emphasis: Focus on cloud data center, mobility, and video, as well as security, software, and services.
  • Investor Perspective: Commitment to returning capital through buybacks and dividend support.

Trusted IT Partner

  • Network Relevance: Customers view the network as critical for their operations.
  • Customer Engagement: Executives align with key customers to understand their needs.
  • Architectural Approach: Solving customer problems through an architectural approach.
  • Benefits:
    • Longer-term engagements with customers.
    • Opportunity to sell multiple parts of the portfolio.
    • Learning from customer needs to inform product development.

Competition vs. Cooperation

  • Industry Dynamics: Cooperation includes both competition and partnership.
  • IBM Relationship: Successful partnership with IBM despite competitive overlap.
  • Customer Alignment: Prioritizing customer needs drives partnerships.

Q3 Performance

  • Architectural Play: Strategic relationships with customers.
  • Portfolio Strength: Improved share positions in 13 segments.
  • Market Bets: Success in data center, cloud, mobility, and video.
  • Execution Focus: Consistent execution on long-term strategies.

Wireless Strategy

  • Architectural Approach: Wireless fits within the architectural approach.
  • Pricing Strategy: No significant changes in pricing or go-to-market strategy.
  • Wireless Growth: Strong growth rates in wireless, driven by market demand.

Gross Margin

  • Range Expectation: Gross margin target of 61-62%.
  • Headwinds: Data center, SP Video, and emerging markets.
  • Tailwinds: Software and services growth.
  • Cost Management: Efforts to drive efficiency and value engineering.

Public Sector and Spending Environment

  • Improvement in U.S. Public Sector: Up 5% in Q3 after several quarters of decline.
  • State, Local, and Education: Up 13% in the U.S.
  • Service Provider Business: Up 8% globally, driven by U.S. growth.
  • CapEx Trends: Shift toward wireless spending by service providers.
  • European Market: Flat in Q3 after several quarters of decline.

Services Growth

  • Outpacing Product Growth: Services growth has consistently exceeded product growth.
  • Growth Drivers:
    • Technical services: Improved catch rate and smart analytics.
    • Data center expertise: Strategic engagement and implementation.
    • Consulting opportunities: Long-term customer engagements.
  • Margins: Services margins remain accretive but may be slightly below historical levels.

M&A Strategy

  • Recent Acquisitions: 15 acquisitions in the past year, including NDS.
  • Focus Areas: Software and services, with 13 out of 15 acquisitions in these areas.
  • Acquisition Size: Sub-$1 billion investments that complement internal capabilities.
  • Future Outlook: Balance of organic investment and acquisitions.

Balance Sheet and Capital Allocation

  • Cash Position: Over $8 billion of U.S. cash, supported by U.S. operations and previously taxed income.
  • Capital Allocation: Minimum 50% of free cash flow returned to shareholders, with emphasis on dividends.
  • Leverage Options: $3 billion line of credit and opportunity to increase debt.
  • Geographic Balance: More acquisitions outside the U.S. to balance cash usage.

FDN (Flexible Network) Strategy

  • Customer Needs: Leveraging existing investments to provide flexibility and capability.
  • Open APIs: Opening APIs through hardware, software, and ASICs.
  • Cisco ONE: Open network environment for developing applications and connecting physical and virtual layers.
  • Advantage: Advantage due to network expertise, installed base, and customer interest.

Closing Remarks

  • Deep Dives: Opportunities for deeper discussions on topics like SDN.

  • Cisco Live: Invitations to upcoming events, including Cisco Live, to discuss product and strategy.

  • Thank You: Appreciation for attending the session.