Cisco Systems Inc. reported strong earnings and profit for its fiscal Q4 and FY2014, beating Wall Street expectations by a few pennies for the quarter. But its shares and outlook continue to be weighed down by flat revenue growth, largely attributed to weakness in the emerging markets and service provider markets. 

As reported earlier in the Rayno Report, Cisco said it will undergo a major restructuring in 2015, which will affect as many as 6,000 employees. However, there was no mention of the timing of Chairman and CEO John Chambers' retirement, which has been the subject of much chatter in the Cisco hallways, according to our sources. 

Earnings came in slightly above expectations for the fourth quarter of its fiscal year, with the company reporting $.55 in non-GAAP earnings and $12.4 million in quarterly revenue. Consensus analyst estimates were $.53 in non-GAAP earnings and $12.1 million in revenue. Cisco's fiscal Q4 and fiscal year ended on July 26, 2014.  

On an annual basis, Cisco reported $2.06 in non-GAAP earnings (after special charges) for its fiscal year 2014 and revenue of $47.1 billion, which came in 3% lower than the prior fiscal year. That represents its largest non-GAAP annual earnings ever, which generated cash flow of $12.3 billion and a shareholder dividend of $3.8 billion for the fiscal year. 

Cisco projected revenue to be flat to up 1% on a year-to-year basis for the next quarter. 

This entry was posted on Wednesday, August 13, 2014 at 20:32 pm and is filed under .
Keywords: Cisco, SDN, IoT, earnings, John Chambers

A group of VMware alumni have launched Platform9, a cloud networking management platform designed to give private cloud networks the look, feel, and functionality of public cloud networks such as Amazon Web Services (AWS).

Platform9 launched today with 12 beta customers, including several that have been named: Marin Software, Moz, and Vendormate. It also announced that it has raised $4.5 million in Series A funding from Redpoint Ventures. The first product will ship by year-end. 

The idea is that some companies may want some of the characteristics of a having its computing infrastructure and applications of a "public" cloud network such as AWS but they want to manage it as a private cloud network that the IT department can more directly control. Many companies move IT initiatives into cloud platforms such as AWS because they are easy to set up: They can be instantly provisioned managed from a self-serve portal, giving the customer access to a powerful, global computing platform. But later, as the business grows, there may be more of a need to build a private cloud as the tradeoffs of public cloud -- such as cost, security, and control -- become more taxing.

This entry was posted on Tuesday, August 12, 2014 at 11:59 am and is filed under Infrastructure & SDN, Investing.
Keywords: Platform9, Private Cloud, Virtualization, VMware, VMworld

There's a little secret inside the networking technology markets: The battle between Cisco, VMware, and a gaggle of startups to take leadership in the Software Defined Networking (SDN) has had the effect of slowing networking technology decisions as engineers and technology architects consider how to proceed with the next generation of technology. 

In the old PC days, they called this Fear Uncertainty and Doubt (FUD), a reference to the marketing strategy used when big companies such as Microsoft announced a new product that stalled the market. It was effective, which may be why you keep hearing about it. 

Last year's big moves by Cisco were classic FUD moves. It acquired startup Insieme and announced its Application Centric Infrastructure (ACI), its own spin on Software Defined Networking (SDN). ACI is shipping behind schedule, of course, as Cisco said it would be delivered by June. It's now supposed to be released by the end of the month. Let's now call it a September release. This slow roll by Cisco, intentional or not, has resulted in the textook technology result: A classic "frozen" market as customers, analysts, and industry experts say that Cisco was largely successful in somewhat freezing the market.

"People are sitting on decisions," one networking executive recently told me. "SDN is slowing the market down."

This entry was posted on Friday, August 08, 2014 at 13:22 pm and is filed under Infrastructure & SDN, Investing.
Keywords: Cisco, ACI, SDN, VMware

A new flavor of Wide Area Network (WAN) optimization -- one that is delivered via the cloud -- is ready to shake up both the service provider and WAN equipment market. Startup VeloCloud is an early leader emerging in the field, having announced the general availability of its service, named VeloCloud, last month. 

VeloCloud is among several startups in this area, including Pertino, which are taking WAN services to the cloud to eliminate the complexity for the customer. WAN links purchased from service providers to connect corporate offices and often employ expensive equipment and leased lines that must be managed by an IT department. 

Some popular phrases used to describe this next phase of WAN development include "Cloud WAN" or "Hybrid WAN." 

"We call this the cloud-delivered WAN," says VeloCloud Co-founder and CEO Sanjay Uppal, in an interview at the VeloCloud offices this week. "What remains at the edge is a very simpler function, understanding the app and knowing which line to send it out on it," 

VeloCloud Founders (left to right) VP Products Steve Woo, CEO Sanjay Uppal, and VP of Engineering Ajit Mayya.
 

This entry was posted on Tuesday, August 05, 2014 at 02:54 am and is filed under Infrastructure & SDN, Applications.
Keywords: VeloCloud, WAN Optimization, VPN, Hybrid WAN

Is Calix Networks (CALX) back? Skeptics who have burned before might have reason for caution, but the company's earnings beat gives the optimists a reason to look forward to an expansion in 1 Gigabit broadband deployments.

New service provider investment in Calix's access equipment was evident in the company's earnings report. In reporting its second quarter 2014 results last night, Calix reported sales of $98.0 million, up 4% above the same period last year and above consensus analyst estimates of about $95 million. The reported earnings per share (EPS) of $0.10 was better than consensus estimates of $0.01. Shares popped about 11%, rising to nearly $10 in morning trading. 

As we've reported here, interest in deploying gigabit Ethernet as a premium service for high-tech business is growing among service providers, and there has been a noticeable uptick in deployments. The trend is also supported by government stimulus policies. 

"The sales upside came as a pleasant surprise and included improved spending from tier 2 & 3 operators, recognition of deferred revenue from stimulus projects, and perhaps increased share from top customer CenturyLink," wrote Raymond James Managing Director and analyst Simon Leopold in a research note this morning. "We envision Calix's business as stabilizing with the improved tier 2 & 3 spending, but visibility remains a challenge; at least y/y comparisons for 4Q and 1Q appear fairly easy."

This entry was posted on Wednesday, July 30, 2014 at 16:42 pm and is filed under Infrastructure & SDN, Investing.
Keywords: Calix, Gigabit Broadband, Gigabit Fiber, Carl Russo.

Facebook Founder and CEO Mark Zuckerberg gets to have all the fun. Not only does he own a Hungarian sheepdog, but his net worth has hit $32 billion as Facebook shares hit new highs with the company firing on all cylinders.

The stock rallied 7% this morning, hitting a new all-time high of $76 per share. [Disclosure: the author was smart enough to buy Facebook shares at $18 but then dumb enough to sell them last year in the $30s. Oops.] 

Facebook reported a record second quarter with revenue of $2.91 billion, an increase of 61% over the same quarter of last year. The company booked $791 million in net profit and is now at a annual run rate of $3 billion in net profits. The social networking company's fortunes were boosted by gains in mobile advertising, much of it attributed to growth in Instagram. Mobile advertising revenue represented approximately 62% of advertising revenue for the second quarter of 2014, up from approximately 41% of ad revenue in the second quarter of 2013.

This entry was posted on Thursday, July 24, 2014 at 17:25 pm and is filed under Mobile, Digital Media, Investing.
Keywords: Facebook, Instagram, Earnings, Advertising, Marketing

Apple shares enjoyed modest gains this morning after a solid earnings report yielding $10.3 billion in cash flow for the quarter. The stock rose $1.50 (1.5%) to $96.22 in early morning trading. 

For the fiscal third quarter ending June 28, 2014, Apple posted revenue of $37.4 billion and quarterly net profit of $7.7 billion, or $1.28 per diluted share. That compared to revenue of $35.3 billion and net profit of $6.9 billion, or $1.07 per diluted share, in the year-ago quarter. More importantly, the company's margins are back on the rise: Gross margins climbed to 39.4 percent compared to 36.9 percent in the year-ago quarter. 

Apple CEO Tim Cook said that iPhone and Mac sales fueled the growth and resulted in the strongest profit growth in seven quarters. The company returned $8 billion in cash to shareholders through dividends and share repurchases during the June quarter.

This entry was posted on Wednesday, July 23, 2014 at 14:05 pm and is filed under Mobile, Investing.
Keywords: Apple, Tim Cook, iPhone, Earnings, Carl Icahn

Verizon's solid earnings results and robust capital spending (capex) bode well for continued spending among wireless technology providers, although some analysts expect spending to remain flatten out in the second half of the year. 

The service provider on Tuesday reported better-than-expected revenue on Tuesday with a jump in wireless customers and a surge in tablet sales. The company reported growth of 53 percent in net wireless customers, to 1.4 million, for the second quarter, and a record 1.15 million in tablet sales. 

Verizon's capex for the second quarter totaled $4.3 billion, above consensus analyst forecasts of $4.1 billion. That's an increase of 5% from the prior quarter and 8% year-over-year. 

This entry was posted on Wednesday, July 23, 2014 at 13:41 pm and is filed under Mobile, Infrastructure & SDN.
Keywords: Verizon, Earnings, Capex

Communications equipment suppliers are ready to report on the second quarter. Earnings in the next few quarters will be interesting to watch with major shifts occurring in telecom spending, including fear over AT&T's recent spending slowdown and questions about the impact of Software Defined Networking (SDN).

Despite optimism among some analysts, there are a number of negative trends in networking and telecom gear. in addition to the concern about a slowdown in spending at AT&T, the merger trend among large service providers means the overall pool of customers is shrinking. In addition, the impact of SDN, in which a new crop of software-only technology companies provides networking gear that can run on cheaper, standard server platforms, could put margin pressure on traditional networking companes. 

MKM Partners Managing Director and communications analyst Michael Genovese issued a note this morning saying he believes data networking fundamentals are still sound. He expects strong earnings from a number of companies including Juniper (JNPR), Infinera (INFN), and JDSU (JDSU), on a back of a continued optical and core network buildout. MKM also expects good results from Ciena (CIEN), Finisar (FNSR), and Cisco (CSCO).

This entry was posted on Wednesday, July 16, 2014 at 14:21 pm and is filed under Infrastructure & SDN, Investing.
Keywords: Earnings, Networking, Cisco, Alcatel-Lucent, Infinera, F5 Networks

The Rayno Report model portfolio, based on an analysis of growth stocks that trade with a reasonable valuation based on a price/earnings/growth (PEG) ratio, continues to outperform the major indices with an average gain of 14% this year (or 14.4% to be exact).

In January we announced our new picks, as we do every year. The portfolio has a record of beating the market overall since 2004, and it has never had a down year. Our lower risk PEG-based model portfolio has roared ahead this year, showing the staying power of an approach that uses valuation discipline. The overall 14.4% gain on the portfolio would have been achieved with a fully invested portfolio. With only 50% of the cash invested, (as we recommended at the start of the year), the portfolio would be up 7.2%. 

In contrast, the S&P 500 Index is up 6.18% year-to-date (YTD), which means the portfolio beat the S&P 500 even if half of it had been kept in cash. This adheres to our lower risk approach of investing less as the market climbs. 

This entry was posted on Thursday, July 10, 2014 at 14:51 pm and is filed under Investing.
Keywords: Model Portfolio, Stocks, Apple
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