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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Adonis who wrote (21676)	2/2/1999 6:08:00 PM
From: DownSouth	Respond to of 77400

Fast and sloppy notes: We believe that we have followed all accounting rules prior to 1999. We believe that we are in compliance with SEC guidance. DSO stable at 48 days vs 47days better than 5 da target. Q inventory turs 9.3 versus 9.7. Will add 600-900 personnel not including acquisitions. Mostly development and engineering. John: Revenue and bookings growth solid. Number of new products in Q = typical entire yearly run rate. No 1 and no 1 market share postion in all markets. Closed 4 acquisitions. Year over year bookings growth > 30%. Ciricuites are being replaces ith IP. VOcie being replaced by data infrastructure. 70% of transacations over the internet. COncerns: Global encon, competition, Y2K, regulation by government in internet. Believe that acquisitions by competitors to make transition from voice to data will have less than 50% success rate. Do not plan to make changes due to Y2K uncertainty. Concerned about any new internet regulations. Believes US can stay 2-3 years ahead of global competition if regulation does not strangle (my word). Products and Geography: Key product announcements: 13 major new products. Catalyst 6000 family for campus networks, complimenting Cat 8500. Gigabit scalability HA and multilayer switching. New switches. New LAN switching devices. New Gigbit e-lan and vlan capabilities. New consumer product for cable companies to add iternet access. Shipped 36000. blah blah blah Pleased w/gigabit and 3-layer switching progress. No 1 position in XDSL. 47% of voice over IP market. 33% desktop switching category. Don: Service providers recognize voice and date merge. Saw design wins must be successfully deployed. Take 3-4 q's to become revenue. GTE will deliver voice over IP, etc. using CSCO. 20% growth over dial platforms q to q. This q bookings greater than all previsous qs combined. MCI/WCOM and JAPAN Telcom added to customer list. "Popeye" won best of show at Comnet last week. Sprint selected Csco ADSL. blah blah Signed up 20 new cpn partners in 28 countries. (New World program) LU/ASCND acquistion: Formidable competitors. LU has 17 acquisitions in 27 months. Majority of LU revenue from circuit switching. Acquision creates overlap between two companyhs products. Most major acquisitions will fail. 5 key areas: shared vision, culture, retention, wins, geographic. LU/ascnd has major gaps in all areas. Pressure on traditional networking competitors. Consumer market place: 3rd phase if internet revolution is consumer driven and beginning now. Brink of massive revolution. Estimated home business $25B in 2003. Expand broadband into home. High speed internet svcs to home, license consumer products. CSCO retain 5% with CSCO brands, rebrand for remainder of market. 14 companies in portfolio. Goal to accel broad adoption of broadband in home. Geographic balance and breakout: (John) Q2 Eame 29% am 51% HMPAC 5% Japan 5% EAME 10% book growth 50% year/year. UK =50% year/year Candada 50% year/year, Brazil challenging Asia -Japan: Q2 grew in line with rest of company Asia Pacific: Q2 balance was pleasing. Looking 2years out for ASIA to improve. 1999 will be more challenging that at any time in this industry. Q3 is normally very challenging. Gross margins will decline over time. Growth 30-50% in countries with strong economies. CSCO will lead the revolutiion: DATA/IP will replace voice. Data/voice/videw strength. End to end solutions. top 10% 15% personnel. Manufacturing. Use of technology internally. Larry: Q3 annoucnement MAy 11 1:45 PST. Q's and A's: SG Cowan: Operating leases. What percentage of bookings? How will evolve? Larry: no specific numbers. Up to around $600M on all leases and financing structures. Important part of strategy. Goal to expand over time to satisfy customers who prefer leasing and create an annuity. Lehman bros: Color on areas above and below your expectations? John: ISP growth 50% globally. EUR good. Japan/Asia balanced well. Surprisingly good in Korea and CHina, even in Hong Kong. USA ISP strong. Enterprises just fair. $2B run rate on small med businesses. Pricong pressures in LAN switching area from traditional competitors. ISP prssure from old world telecom competitors on transaction by transaction basis. Seen twice number of market opportunites that we are able to reach with our R&D budget. Hambrecht and Q: Q3 is challenging, why? John: Q3 always challenging. Nothing unusual. Just seasonal. JPM: Didn't mention new ATM swithches? When out? Don: New wins around MGX. BPX will build out. PSINET had 12000 to upgrade. VOIP and traditional dial. First Boston: Rate of PBX displacement. What segemnts get hit at what rate? Don: TDM shine will come off in 1999. ATM class 4 will grow. Class 5 longer term. Telcos will not want to deploy new class 5 switches. DSL returns second lines to telcos, freeing ports. 1999 branch offices first place for Celsius. Will take a couple years. John: Customers ay they are moving to data infrastructure for cost and flexibilty and industry standard basis. Customers asking PBX replacements. Will happen faster than we realize. Will provide single data infrastructure for data/voice/video. Excited. Don: Voice mail is real applcation for 1999. M/L: Comment on product sectors growing fastest? John: Total swithc market and access conc and high end routers selling well. Dial very good XDSL good. Reasonable balance across teh board. Hardly any negative numbers. ISP growing 50%. Sutro: Followup. ISP what areas growing fastest? Don: BOth channel side and infrastructure both growitn 50% Heritage: LU/ASCN merger. WIll LU's transmission products be a negative; John: Vertical integration versus horizontal integration. CSCO is open standard and can partner. No overhead costs. Tricky partnerships. CISCO can bring best in class to market. I think CSCO has advantage in DATA/voice/video. Don: SONET implementations coming in Q3. We partner well will Nortel, Cienna, etc. Bernstein and Co: Uncertainies in q3. Corp budgets etc? John: ISp arena growth 50% globally. SMB hit $2B run rate. Enterprise >30% growth rate, varying dramatically by industry and country. Ready for challenges in south america. pleasant surprises in Asia. DLJ: Voice topic. Packet networks have never scaled to voice network sizes. What are you doing to assure quality of service as scale goes up? Don: Inevitable. Drive enterprise customers first. Give 50% of revenue to carriers. Internation arbitrage has voice over IP without international long distance. Then class 4 for not difficult ATM. Class 5 for >50k ports. 2-year journey. Plenty of revenue in migration for us to grow. ISPs not nearly as challenging. evertt securities: Who are you partnering with for applications for Celsius platform? Don: publish APIs to application developers. Open standards. Expect some acquisitions. Bankers Trust: Update on ATT? Will they go LU? John: Will not discuss T. Generality--ATT aggressive. Working with T on some areas. Will announce one deal at a time. T is LU's largest customer. CSCO comfortable with T. Prudential: GIven growth opportunities, any plans for R&D or SGA higher? John: Keep them in line. May deviate q to q. Will be conservative on expenses for a q or two. Fewer hires Q2 than previous. John: If we see an market taking off we will make the investment quickly. CIBC Opp: Revenue scale to voice/data. 30% growth--was it converting enterprise markets? John: can't break it out now. Small number. Architecture wins. Customers understand and delaying PBX buys. Asking CSCO to move faster. Ziegle: Sales structure for ISPs, Sales cylce longer. How do you motivate sales force? John; ISP sales cycle is longer, but it smooths out. Not a problem. Do you see an expansion in sales force? John: Yes, will expand ISP coverage and support. Form partnership with SI companies. ?: Lease fianncing--degree of interest income? Don: Not yet material. High hopes for CSCO Capital in years out. OVer $1B soon to $3B in next year or two. John: Watched IBM do it. Challenge is how to convert from sales to lease without impacting cash flow. Tucker Anthony: Don: See 20-40% market share in new world areas. Will take 5-7 years for new world to catch up with old world market. When will CSCO replace PBXs internally? John: Will push aggressively. Pilots underway. One campus converted by 1 year. COmplete in 2 years. Nations Bank: ANy pattern in quarterly patterns causing concerns for Q3? John: No surprises. No different. Nothing to raise concerns. Q3 is just always harder.