To: Paul Senior who wrote (52811 ) 11/22/2013 11:23:55 PM From: MNTNH 1 RecommendationRecommended By
Read Replies (2) | Respond to CSCO - my thoughts Routers/Switches are still mainstay, slowly declining market share- core, edge and enterprise Advanced technologies had a portfolio of mixed results investments in this field including wireless, data centres, cloud (SolveDirect, Meraki), security (Cognitive Security, Sourcefire), software maker (Intucell) yielding some good growth, most yield north of 50% yoy growths thought others like NDS (software maker) are like lemons. Their 12-14% r&d to sales excludes acquisitions. However the set top boxes recently launched isnt doing well with service revenue attributable to the boxes down c.20% yoy. 1Q2013 - Product revenue for emerging markets exports fell 12% yoy- attributed to the NSA spying issues. China down -17%, India -16%, Japan -23%. Also Russia and Brazil fell as well. The company made special mention of competitors from Asia, especially China - think Huawei and ZTE Corp :) My thoughts Although market share is dipping, general internet data is still growing at a fast clip which benefits routers and switchers. Their position in US is still fortress like undeniably. Despite the loss in market share, the major routers/switchers competitors such as Juniper, Alcatel Lucent, Palo Alto Networks and Riverbed havent been able to significantly gain market share with a corresponding gain in profitability. The Chinese competitors are a different story. With sufficient government and political support, they may be able to make significant inroads to EM markets that CSCO is already in. John Chambers with his gang has some major issues. Having no focus and scattering-shot investments is the sure fire way to burn cash. Also taking the easy way out, they have decided to "refocus on routers and switchers" and chop their workforce. Their buybacks and dividends have also been not too smart. Often buying when its expensive. Personally I am not a sucker for dividends and would rather they use the cash smartly. $48B cash and investment, $16B in debt with over $8B in OCF p.a., a price tag of $114B is not a screaming buy either ...esp with the heavy capex for the last few quarters. 1Q2013 alone saw $5B in capex. Also, cash is at opco levels, so assuming is apportioned vis their earnings layout, about half of their cash cannot be remitted back to US and distributed as dividends without some heavy taxes. CEO John on the future :)
