Cisco Systems Earnings Call Nuggets: Security Segments and Mobile Offering

Cisco Systems Inc (NASDAQ:CSCO) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Security Segments

Amitabh Passi – UBS: John, just wanted to ask you about a few of your segments or end markets in particular, security, collaboration, routing and even service provider, video, excluding India, so, I mean all these segments seem to be flat to down year-over-year. Just trying to understand better, is it simply a function of demand, pricing, if you could just maybe shed some more color there?

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John T. Chambers – Chairman and CEO: Amitabh, you gave probably about six or seven questions. Is there one specific area that you’d like me to deal with, whether it’s service providers or security or video?

Amitabh Passi – UBS: Maybe security, if you could just touch on that?

John T. Chambers – Chairman and CEO: Sure. If you watch, our security business was just up 1%. In the areas where we sell in architecture and let’s use the U.S. get accounts or the enterprise accounts or even commercial, our security business grows well, but when we go through our partners on a global basis. It’s a much more complex film. So, I think what you’re going to see is due over the next period of one to two years is with our new leadership under Chris Young, who’s doing a super job, we’re going to move more and more to tying the security pieces together in an architectural approach and as we moved away from specialist in an area where there’s security or video, collaboration, our general sales force, Rob had to pick that up and candidly lost a little bit of momentum in the process. So, in terms of security, I think it is a complex architectural sale as we wanted it to be, and I think you will see us improve on that over the next one to two years. Let me give you one more since you were so nice. On the service provider segment of the house, our relationship with service providers are just excellent. It is just lumpy. And just to give you a worse story, we had one order, Rob, that you and I both called the local account team on coming in on Saturday at the end of Q1. If that Saturday had been booked on Monday, this quarter would have grown in mid-single-digits. Instead the first quarter grew in mid-teens and I think I might have misspoke on the call. Q1 a year actually grew business by the way in terms of total bookings, 13% in Q2 and fiscal year ’12 grew business by 7%. I might have said 17%. So, putting that into perspective. Those comments, however, made on service providers are referring to Q of this year and Q2. We are in really good shape here and you watch service provider spend and as you would expect, I’ve talked to many of the top CEOs in our service provider customers. More and more the dollars are moving mobile. So, our ability to combine fixed and uniquely together is extremely strong and our portfolio architecturally tying together is unbeatable. So, I’m comfortable with where we are. U.S. service provider I think will be very solid. I have a lot of confidence in Michael Glickman and the team there and in terms of whether you’re at an AT&T or Verizon, a Sprint, a Comcast to Time Warner, we’ve never been in strong position than we are really tough than our competitors in those accounts. Nice way of saying we’ll get our fair share of spend plus some.

Mobile Offering

Brian Modoff – Deutsche Bank: Continuing on that service provider line with the operators in the U.S. except for Verizon ratcheting up their spending this year. You’ve got some of the cable operators as well, some improvements in China, Japan and even Europe perhaps not worsening. How do you see that overall evolving through the year? And then second, you’ve got (indiscernible), you just brought Intucell, you only need IP access points, so you’ve got a full-on mobile operating offering. What’s your view on that?

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John T. Chambers – Chairman and CEO: It sounds like you’ve been talking to a couple of CEOs that we’ve been calling on. If you watch the service providers as a whole, are moving more and more – (there’s many), as I alluded to in the first comments, more into wireless, but they want an architectural play. Their plans are – and their plans are like all of our customers’ plans, they are going to watch to see what happens, they are going to watch to see if there’s a hesitation in the economy with any government missteps which I think personally we’ll probably manage through, and they will balance their spending throughout the year. And as you as you indicated, most of the service providers are reasonably optimistic on increasing their CapEx spending this year, and even those that may not, are often spending more in the areas where we are strongest, which is the mobility side of the house. I’d be surprised if you don’t see us get our fair share of spending in this area and more, but just using the U.S. service provider as an example, where we have great team, it just is lumpy, and I don’t mind if team Mel doesn’t like me using those words, but we grow mid-teens one quarter, flat the next, 7% the next, and so, I think we will achieve the service provider CapEx spend growth plus some in terms of our growth rates and I’m hard-pressed to say a competitor that has more than a product or two that comes at us architecturally. Are you aware of any Rob?

Robert W. Lloyd – President, Development and Sales: I think that’s accurate, John.

A Closer Look: Cisco Systems Earnings Cheat Sheet>>