Cisco as a Bellweather…where’s all the commentary?
(Ed.: I wanted to clarify that issues external to security
vulnerabilities and advanced technology most definitely caused the impact and commentary
noted here — global economic dynamics nothwithstanding, I’m just
surprised at the lack of chatter around the ol’ Blogosphere on this)
From the "I meant to comment on this last week" Department…
A couple of weeks ago, analyst reports announced that Cisco was indicating a general slow-down of their enterprise business and they were placing pressure on the service provider business units to make up the difference. Furthermore, deep discounts to the channel and partners were crafted in order to incentivize Q2 customer purchases:
Cisco is headed for a disappointing quarter, according to a cautionary research note issued Monday from a research analyst, reports Barron’s Online.
Samuel Wilson, an analyst at JMP Securities writes that the slow down in U.S. enterprise business during Cisco’s fiscal second quarter has continued into its current quarter, according to Barron’s.
According to the Barron’s story: "Wilson writes that ‘according to
resellers, top Cisco sales staff have recently expressed concerns about
making their April quarter numbers.” He says that the company has
apparently increased “partner-focused incentives’ designed to shift
business in from the July quarter. ‘Based on the past three months,
many resellers now believe that U.S. enterprises have begun to delay
discretionary spending above and beyond normal seasonality typical of
the [calendar] first quarter.’Wilson also wrote that Cisco has cut headcount and expenses in its
enterprsie switching business unit. He forecasts Cisco’s fiscal third
quarter revenue to be $38.1 billion, down from the consensus estimates
of $39.4 billion, according to Barron’s.
Given how Cisco is a bellweather stock for not only IT but in many case an indicator of overall enterprise spend trends, why isn’t there more concern in the air? Maybe it’s just rumor and innuendo, but when analysts start press releases about Mr. Chambers’ neighborhood, they’re usually pretty conservative.
Rothman practically needed a Wet-Nap when he commented on Cisco’s Q1 announcement (Cisco Takes it to the Next Level) but nary a word from the "All things including the kitchen sink will go into a Cat65K" camp on this news? What, no gleeful prognostication on rebounds or doom?
Interestingly, from here, Goldman advises to buy ahead of Q3 announcement:
We believe that management will put concerns around slower U.S. large
cap tech spending to rest. It represents only 13% of sales and we
believe is seeing indications of a rebound. We believe management is
likely to reaffirm positive longer-term trends in emerging markets, new
technologies and the impact of video on networks as key drivers of
sustained double-digit top-line growth.
We’ll see. Focusing on all the advanced technology projects and not focusing on core competencies can bite a company — even Cisco — when they least expect it. Couple that with the continued vulnerabilities in their security products (another one today across Pix/ASA) and I’d say folks might start talking…
I wonder how the security products have weathered through all this?
…but that’s just me. Lash away, boys.
/Hoff
What do Cisco's financials have to do with their stranglehold on enterprise network infrastructure? Their top switching competitors are also public companies, Chris. Go look at top-line revenue for EXTR and FDRY; neither is setting the world on fire, or making up for the "gap" Cisco is creating.
I know you really, really want to believe that Crossbeam is just poised to take the top slot from Cisco, and that enterprises will have N Crossbeam ATCA chasses for every K Cisco Cat6ks. I just don't see why anyone would do that. Why would I bet on a proprietary chassis from a small vendor over a more capable part from the market dominator?
Thomas:
I want to thank you because you just made me $50. I bet (and won) that you'd be the first person to comment on this.
I'm merely puzzled by the fact that there isn't mode buzz about this. This wasn't a marketing shill for Crossbeam; I'm genuinely interested in why folks weren't more concerned.
But on the Crossbeam kick…I'd love it if you could actually (finally) do some homework on Crossbeam's products. We're not ATCA based. Our customers actually do exactly what you claim is improbable. Want to talk an Enterprise example who just bought 17 fully-loaded X80's to sit on top of their brand new 65K's?
How about a service provider who has close to 100 of them delivering security services across their network?
I know, I know…800 customers is tiny compared to Cisco's numbers. We can't possibly compete…
Unless you've actually seen or used my product, besides being able to use a web browser, why don't you nut up and tell me how the Cat65K is more capable of a security product than an X80.
I can't talk more about your products without violating NDAs.
Oh, goody.
Since you don't have an NDA from Crossbeam, it must be someone
else's which is a little odd; but given what you do, I *think*
I understand.
I'll leave it at that. I'll still sit down and grab a beer sometime. We can talk about someone else's products, instead.
/Hoff