I'd note that along with his co-president Gary Moore, Lloyd is considered the most logical current successor for CEO John Chambers, who is expected to retire at some point in the next several years. He has been in various management positions at the networking giant for the last 18 years. So when Cisco sends Lloyd to be a keynoter at the Goldman conference, that's an interesting signal.
There will be a lot of focus in this discussion on the company's January quarter financial results, which were released after the close yesterday. While the results beat Street estimates at both the top and bottom line, and April guidance was about in line, the Street was a little concerned about the tone of the comments Chambers made on the call. Ergo, the stock is trading modestly lower this morning.
I will be blogging the proceedings live; here are some of the highlights.
- Lloyd says there are seeing some stabilization in Europe, but southern and eastern Europe are still soft.
- He said there is improvement in U.S. enterprise and commercial order rates.
- India saw more than 50% growth. Good growth in Brazil, Mexico and Russia.
- But China was down 4%.
- He says overall there is a "soft global recovery."
- Bookings overall were flat year-over-year.
- Jankowski asks Lloyd about carrier business. He notes that in service provider video, they were up 20% in the quarter. Mobility also showed growth in the quarter. That was up in the high teens. Service provider WiFi business doubled. The cap ex at the carriers are shifting. The softer parts reflected Cisco being more selective on set-top boxes, where they are dropping some unprofitable business in Europe.
- On routing, he says there are big orders that coem in for core infrastructure, and if you look over a year, you get better picture than single quarters, which are lumpy. He says they feel solid on outlook for core and edge routing and for the mobility platform.
- On a pick up in U.S. state and local government: Showed some growth; that is an encouraging thing. He says education in particular has improved, though there are offsets by 5% decline in U.S. federal market (which was better than the 15% drop in the October quarter.)
- Enterprise WiFi grew 29% in the core. Mobility around the world is critical; we see cap ex shifting to mobile networking.
- Video remains a focus for Cisco. Videoscape platform has been deployed by Cox, which they announced at CES in January.
- Services remains a growth business, consistently growing low double digits. He says there remains a "huge opportunity" in services.
- On switching: Aggregate was up 3%; but the company has projected flat next couple of quarters, Jankowski notes. Lloyd says there are some positive trends. Data center 10 gig switching is an area of strength. Headwinds though in selling into the public sector and European enterprise market. He says they have a "very strong innovation road map here."
- On the market for small cells: With explosion of mobile data, operators are changing the edge of their radio networks. Doing extremely well with edge technology deployed around the world; he says that is a significant growth driver. On the radio side, he notes that they are increasing their focus on radio-related software. The company did an acquisition in self-optimized networks for a variety of radio frequency bands. Allows operators to automate their heterogeneous networks. People want roaming between WiFi cells, and roaming from LTE to WiFi. That's all software, he says. So they will participate in both small cell LTE and WiFi.
- On opening up the network: Customers want access to intelligence in the networks they are building. They are opening up APIs to all of the operating systems, not just in the data center. There is $180 billion Cisco installed base. They are going to open up APIs so application developers can call network intelligence across the network.
- On margins: The company has kept gross margins in 61%-62% for many quarters now - remarkably consistent, as Janakowski notes. Lloyd says there are several reasons for that, including improvement in hardware margins. But also 13 of last 14 Cisco acquisitions s were in the software space, which reflects the new focus on the software segment. He says they are working to build a $12 billion software business. Another part of the portfolio is services, with about 67% gross margins; it continues to grow low double digits; 22% of the business now, heading to 24%, and then 26%.
CSCO this morning is down 31 cents, or 1.5%, to $20.83.
