Cisco Systems, Inc. Presents at JPMorgan's 40th Annual Global Technology, Media and Telecom Conference, May-15-2012 09:20 AM - NasdaqGS:CSCO

NasdaqGS:CSCO

Christopher Dedicoat, the Advisor of the Office of the Chairman & CEO at Cisco Systems, Inc., has provided several key insights and updates regarding the company's operations and strategies during his presentation at JPMorgan's 40th Annual Global Technology, Media and Telecom Conference on May 15, 2012:

Key Points Discussed by Christopher Dedicoat:

Third Quarter Earnings Overview

• Revenue Growth: Revenue grew by 7%, with a projected 2% to 5% growth for the upcoming quarter.
• Net Income and EPS: Net income and earnings per share both increased by 20% and 21%, respectively.
• Margins Improvement: Noted a 11% margin improvement on the Nexus 7000 range, now 5 points below the 6500 range, aiming to improve value engineering and margin performance.

Geographical Revenue Breakdown

• Americas: Saw 3% growth in Q3.
• EMEA (Europe, Middle East, Africa): Experienced 5% growth in Q3.
• Asia Pacific: Showed 24% growth in Q3.
• Comparative Growth: In Q2, EMEA had 15% growth, while the company expects challenges in EMEA in the upcoming quarter.

Business Segments

• Service Provider Business: Saw good growth.
• Commercial Business: Grew by 8%.
• Enterprise Business: Experienced a slight decrease of 1%.

New Areas of Focus

• Data Centers: 67% growth in Q3.
• Server Business: 57% growth, noting that the market slowed due to the pending release of the Romley chips.
• Mobility: Wireless business grew by 19%, with SP Wi-Fi up 127%.
• Collaboration: Mentioned a stall in the marketplace, with TelePresence experiencing a flat business, attributed partly to the enterprise market's decline.

European Market Analysis

• Distinct European Markets: Highlighted three distinct markets: High-growth and competitive countries (Northern Europe), mid-tier (U.K., Netherlands, Belgium), and challenged markets (south of Europe).
• Germany: Slowed for Cisco, influenced by most competitors. Exports in Germany are increasing again after three months of slowing.
• Resource Allocation: Moving resources to the Russian marketplace and the Middle East and Africa.

Cash Management and Strategy

• Use of Cash: Aggressive stock buybacks at current stock levels. Continuously looking for acquisitions to accelerate penetration into new markets and capitalize on market transitions.
• Dividends: Increased dividends in Q2.
• NDS Acquisition: Considered a good acquisition for Cisco, focusing on security and digital content protection.

Public Sector and Government Spending

• Concerns in Europe: Noted hesitancy among enterprises in Europe due to uncertainty about future changes in Europe.
• Public Sector Spending: Recognized the difference in IT investment between developed nations (like the U.S.) and Europe, highlighting potential for increased investment in efficiency and productivity.

Carrier Spending

• Protection from General Slowdown: Carriers are less closely linked to GDP and more to local market conditions. Noted significant growth in bookings for the top 5 service providers in Europe in Q3.

Political Risk and Government Engagement

• Neutral Political Stance: Must maintain neutrality given the political landscape's shifts.
• Focus on Competitiveness: Governments understand the need for higher levels of competitiveness amidst austerity measures.

Data Center Consolidation

• Government Focus: Governments worldwide are focused on reducing data centers and leveraging cloud-based technologies for investment.
• Action Timeframe: Data center consolidation varies depending on the stage of government terms, with pressure increasing as governments aim to make decisions for efficiency.

Wi-Fi and BYOD Phenomenon

• Impact on Switching Business: Acknowledges the potential cannibalization of the switching business due to BYOD and Wi-Fi usage.
• Strategic Value of Wireless: Emphasizes the strategic importance of wireless, including femtocells, small cells, and enterprise management platforms.

LTE and Radio Access Network

• Focus on Complete Solutions: Considering the integration of LTE radios into Wi-Fi hotspots, but not necessarily as a standalone radio access network.
• Competitive Positioning: Cisco's position in LTE, moving away from ATM networks, and anticipation of growth with LTE.

Emerging Markets

• Margin Fluctuations: Margin contributions from emerging markets are expected to fluctuate, with Russia showing consistent growth and stable margin contribution.

These points encapsulate the comprehensive overview of Cisco's operational status, strategic directions, and market positioning presented by Christopher Dedicoat during the conference.