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Canaccord Genuity Afternoon Coffee on Cisco Systems (CSCO): Proxy That!

July 25, 2012 12:56 PM EDT Send to a Friend
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Canaccord Genuity Afternoon Coffee on Cisco Systems (Nasdaq: CSCO): Proxy that!

Cisco Systems confirmed plans to eliminate about 1,300 jobs, or 2% of the workforce, as it looks to streamline its business in the face of economic uncertainty. Credit Suisse believes the announcement speaks to both stronger than hoped for rev headwinds consistent with the macroecon climate. Separately, rival software maker VMware (NYSE: VMW) announced it was buying computer networking specialist Nicira for nearly $1.3 billion. Credit Suisse believes VMW’s pending acquisition is a relatively more serious issue as the deal is meant to expand VMware's product line in the rapidly growing field of computer "virtualization." The idea coming out of some circles is that Nicira’s business model has been based on establishing one universal Ethernet switch and eliminating the proprietary switches like those made by CSCO and Juniper (Nasdaq: JNPR). Credit Suisse believes the acquisition represents a long-term competitive threat to CSCO’s revenues and margins. However, in the near-term, CSCO has dramatically improved its competitive position, taking back share in its core enterprise switching and carrier routing businesses. Credit Suisse sees CSCO as well-positioned to benefit from improvement in end demand. Separately, CSCO’s $5bn acquisition of U.K. video service provider NDS has received approval from the European Commission (EC), after it ruled there was no potential for the deal to create an uncompetitive market. The deal will see CSCO incorporate the firm's technology into its own Videoscape product and help CSCO push into new emerging markets, such as India and China.




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