Thursday, May 31, 2012

Cisco Projects Internet Will Be 4 Times Larger in 4 Years

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Cisco's VNI Forecast Projects the Internet Will Be Four Times as Large in Four Years

Annual Cisco VNI Forecast Expects Worldwide Devices and Connections to Grow to Almost 19 Billion - Nearly Doubling From 2011 to 2016

SAN JOSE, Calif. and WASHINGTON D.C. - May 30, 2012 - Today, Cisco issued results of the annual Cisco® Visual Networking Index (VNI) Forecast (2011-2016), the company's ongoing initiative to forecast and analyze Internet Protocol (IP) networking growth and trends worldwide. The VNI Forecast update covers 2011-2016, and quantitatively projects the significant amount of IP traffic expected to travel public and private networks, including Internet, managed IP, and mobile data traffic generated by consumers and business users. This year, Cisco has also developed a new complementary study - the Cisco VNI Service Adoption Forecast, which includes global and regional residential, consumer mobile, and business services growth rates.

Welcome to the Zettabyte Era - Cisco VNI By the year 2016, annual global IP traffic will exceed a zettabyte. What does the zettabyte era look like? Well... By that same year, the Internet will drive almost four times more traffic than it did in 2011. And by 2016, the average Internet user will generate 32.3 gigabytes of traffic per month, up from just 11.5 in 2011. During this 5-year period, the percentage of global business users with two or more mobile devices will grow more than 3-fold (8.1%) (26.8%). By 2016, over half of the world's IP traffic will come from wi-fi. Globally, the average mobile connection speed will grow 10-fold, reaching 2.2 Mbps by 2016. The sum of all forms of video will exceed 86% of global consumer traffic. A four-fold increase from 2011. And of this growth, mobile video and desktop conferencing will be the fastest growing mobile and business services. By 2016, the gigabyte equivalent of all the movies ever made will cross global IP networks - EVERY 3 MINUTES!. Over the course of a year, that's about a trillion gigabytes...or one zettabyte. Welcome to the zettabyte era...

By 2016, annual global IP traffic is forecast to be 1.3 zettabytes – (a zettabyte is equal to a sextillion bytes, or a trillion gigabytes). The projected increase of global IP traffic between 2015 and 2016 alone is more than 330 exabytes, which is almost equal to the total amount of global IP traffic generated in 2011 (369 exabytes). This significant level of traffic growth and service penetration is driven by a number of factors, including:

1 - An increasing number of devices: The proliferation of tablets, mobile phones, and other smart devices as well as machine-to-machine (M2M) connections are driving up the demand for connectivity. By 2016, the forecast projects there will be nearly 18.9 billion network connections - almost 2.5 connections for each person on earth, - compared with 10.3 billion in 2011

2 - More Internet users: By 2016, there are expected to be 3.4 billion Internet users - about 45 percent of the world's projected population according to United Nations estimates.

3 - Faster broadband speeds: The average fixed broadband speed is expected to increase nearly fourfold, from 9 megabits per second (Mbps) in 2011 to 34 Mbps in 2016.

4 - More video: By 2016, 1.2 million video minutes - the equivalent of 833 days (or over two years) - would travel the Internet every second.

5 -Wi-Fi growth: By 2016, over half of the world's Internet traffic is expected to come from Wi-Fi connections.

Visual Networking Index (VNI) - Cisco Systems

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Monday, May 28, 2012

Largest USA Tech Companies Earnings Slip, Apple Dominates

The Largest USA Tech Companies have reported quarterly aggregate net income of $33.9 billion, which is lower than the prior quarter $37.4 billion. This is a sequential QoQ decrease of -$3.5 billion and -9.4%. The net decrease is not unusual or unexpected as the first quarter of the calendar year is typically lower than the  prior fourth quarter (Holiday) results on an annual cyclical basis. The largest sequential QoQ increases were HP (+$1.2B) and Qualcomm (+$829 million). The largest sequential QoQ decreases were by IBM (-$2.43 billion), Microsoft (-$1.52 billion), Apple (-$1.44 billion), and Intel (-$622 million).

For the latest quarters reported, Apple leads with an incredible $11.62 billion. Second is Microsoft at $5.11 billion, less than half of Apple. These top two are followed by #3 IBM at $3.07 billion. The rest of the pack follows with #4 Google at $2.89 billion, #5 Intel at $2.74 billion, #6 Oracle at $2.50 billion, #7 Qualcomm at $2.23 billion, and #8 Cisco at $2.17 billion. Trailing are #9 HP at $1.47 billion and #10 Amazon at a mere $130 million. I have included because of the Kindle Fire, streaming, cloud services, and the resulting competition with others listed. Apple comprises 34% of the total quarterly net income of the 10 tech companies listed!

The Largest USA Tech Companies have reported an average return on assets of +14.61%, a +0.19% increase from the prior quarter of 14.42%. Amazon and HP dragged the average down. The largest sequential QoQ increases were Qualcomm (+2.62%), Apple (+1.44%) and Google (+0.75%). The largest sequential QoQ decreases were Microsoft (-1.18%), Intel (-1.09%), and HP (-0.93%).

For the latest quarters reported, Best of Breed goes to Apple with a commanding and incredible lead of at +31.78% ROA, followed by Microsoft at 21.37% and Intel at 18.14%. Next are #4 Google 15.76%, #5 Qualcomm 15.51%, #6 IBM 14.13%, and #7 Oracle 13.44%. Significantly lagging the field are #8 Cisco 8.36% and #9 HP at a dismal 4.74%. Retail-oriented Amazon is last and #10 at +2.82%.

Updated through Cisco quarterly financial results reported 5-9-12
Next reports: HP (May 23), Oracle (June)


Friday, May 25, 2012

Cisco Reports Steady Earnings, Lower Outlook

Cisco ($CSCO) reported QE April 2012 financial results on May 9.

Cisco has rebounded from the financial performance lows of 2011 and is doing relatively well. Let's be clear, Cisco is not a high growth company but trudges along on recent year on year revenues growth of 6%+ and volatile YoY historical earnings per share growth of 15%+. If you get more - great - if you get less - wait until next quarter. Cisco's business environment has been described as slow-moving sales.

The QE April 2012 Non-GAAP earnings per share of $0.48 beat estimates by +$0.01 and GAAP EPS of $0.40 was the same as the prior quarter. CEO John Chambers has restructured Cisco, cut costs, increased dividends, continues stock repurchasing, and has successfully aimed at better bottom line results.

Revenues were an all-time high and operating income and net income were very good. Margins were steady and solid. Cisco has moved beyond the quarterly restructuring charges, a minor $20M, and financial performance has improved. CEO John Chambers stated, "We delivered solid results this quarter with record revenue and non-GAAP earnings per share. We are successfully executing against our long-term strategic plan of growing profit faster than revenue, and in a cautious IT spending environment, we continue to outperform our competitors."

Cisco Income Statement QE April 2012 Cisco reported record total revenues of $11.59B, net income of $2.17B, and GAAP earnings per share of $0.40. From the prior quarter QE January 2012, these were +0.53%, -0.78%, and +0.00%, respectively. From the prior year QE April 2011, these were +6.64%, +19.81%, and +21.21%, respectively. The quarterly restructuring charge was an immaterial $20M, compared to the prior quarters of $3M, $202M, $768M, and $31M. Gross, operating, and net margins were steady at 61.87% (6-quarter high), 23.73% (9-quarter high), and 18.68%. Cash flow from operations of $0.54 per share is above the historical average. The operating expense ratio of 38.13% is below the historical average.

Cisco Balance Sheet QE April 2012 Cisco's total assets increased to a record $91.15 billion. The capital to assets ratio of 56.36% is stable and a 10-quarter high. The current ratio of 67.15% is a multi-year high. The return on assets is low for a technology company, but increased to 8.36%, a 4-quarter high. Total debt dipped to 17.96% of total assets, a multi-year low, and is the result of an embedded financing operation.

Cisco Outlook QE July 2012 CEO John Chambers estimated total revenues to grow 2% to 5% YoY. This equates to $11.42B to $11.76B for QE July 2012. This is about the same as the QE April 2012 guidance and results. Non-GAAP earning per share is estimated at $0.44 to $0.46. This is lower than the QE April 2012 Non-GAAP EPS results of $0.48. This isn't really all that bad an outlook as the QE July is typically the annual cyclical low for Cisco. This would be the best QE July performance in years, if not ever.

Workforce Reduction, July 18, 2011 Cisco will layoff 6,500 employees and incur cash-based restructuring charges, consisting of severance and other one-time termination benefits, estimated at $1.3 billion over several quarters. Cisco estimates approximately $750 million of these charges will be incurred in QE July 2011, including approximately $500 million relating to the voluntary early retirement program. The remaining estimated $550 million of charges will be recognized in the subsequent 4 quarters, beginning with QE October 2011. Cisco Announces Additional Detail on Comprehensive Action Plan

Cisco Financial Performance by the Quarters

Sunday, May 20, 2012

Top 5 Best Laptops: design, performance, price review

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Apple MacBook Pro

Top 5 Best Laptops

#5 Samsung Series 9
#4 HP Pavilion DM4 3090 Beats Edition
#3 Samsung Series 7
#2 HP Envy 15
#1 Apple MacBook Pro

CNET Top 5: Best Laptops We have the best all-around laptops that aren't trendy ultrabooks or wimpy Netbooks!

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Thursday, May 17, 2012

Rackspace Earnings Disappoint, Growth Slows

Rackspace ($RAX) reported Q1 2012 financial results on May 7.

Rackspace could not match the prior record-breaking Q4 2011, despite an adequate increase in revenues and surprising increase in gross margin. Both are all-time highs. Even though Q1 2012 is arguably the second-best quarter ever, the small decrease in net income (-$1.87M) and earnings per share (-$0.01) QoQ is the first since before Q3 2009. The streak has been broken. The year over year increase in earnings per share was strong (+70%).

CEO A. Lanham Napier delivered the revenues and gross margin, but performance weakened at the operating margin level. Operating expenses hit a 4-quarter high of 59.25% of total revenues. The income statement performance slowed at that point and earnings per share took the small hit of -5.56% QoQ. Napier said, "While we’ve made a lot of progress so far in 2012, we have much more to do. We are executing through a very important platform shift to our next generation cloud, and we need to make this experience incredible for our customers. Massive technology disruptions like this create once in a lifetime opportunities for companies to seize the moment, take the initiative, and lead the revolution. Our goal is to lead the revolution".

Historically this operating expense ratio does peak annually in Q1 and 2012 was lower than the prior 2 years. So there is a positive aspect. Performance then improves through the remainder of the year. Therefore, expectations are for better, and record-setting, quarters ahead.

Rackspace Income Statement Q1 2012 Rackspace reported record total revenues of $301.36M, net income of $23.18M, and earnings per share of $0.17. From the prior quarter Q4 2011, these were +6%, -7%, and -6%, respectively. From the prior year quarter Q1 2011, these were +31%, +68%, and +70%, respectively. Gross margin increased QoQ and YoY to 71.05%, a multi-year high. Both the operating margin and net margin dipped QoQ but increased YoY to 12.31% and 7.695, respectively. Cash flow from operations dropped to a 7-quarter low of $0.499. The operating expense ratio of 58.75% is a 4-quarter high.

Rackspace Balance Sheet Q1 2012 Rackspace's total assets reached a record $1.09 billion. The capital to assets ratio rose to 61%, which is a multi-year, if not all-time, high. The current ratio is a low 27% but improving. Working capital has been an issue in the past. Current working capital rebounded to a 6-quarter high of $55M. The debt ratio of 13% is reasonable and trending downwards. The return on assets is low for a technology company, but has consistently grown to the current multi-year peak of +8.92%.

Rackspace Outlook 2012 None provided, may be provided in annual letter to stockholders this spring.

Sunday, May 6, 2012

Microsoft Earnings Slow More Than Expected

Microsoft ($MSFT) reported calendar Q1 2012 financial results on Thursday, April 19

Q1 performance was the expected letdown after the prior Q4's record high total revenues and earnings per share. The annual March slowdown was more pronounced than I expected when looking at YoY results. Both net income and earnings per share dipped slightly YoY, which suggests a base is not being built during the transition to battle Apple, Google, et al. in the leading edge technology race. This is the first time both have decreased YoY since the QE September 2009.

The good news is a negative trend was reversed. Gross margin increased, after setting a multi-year low in the prior quarter. However, the operating margin decreased, mostly the result in the dip in revenues and a general increase in operating expenses. Net margin dropped to a 7-quarter low. This isn't the high growth, high margin Microsoft grandpa used to talk about.

All segment revenues dropped, with lower-margin Entertainment & Devices plunging. This ruined the quarter and occurs every Q1 after the Q4 annual Holiday peak. Higher-margin Windows & Windows Live segment revenues slightly decreased, as did Business and Servers & Tools. This was the reason for the increase in gross profit margin.

CEO Steve Ballmer kept his game face on while touting the future, "We’re driving toward exciting launches across the entire company, while delivering strong financial results. With the upcoming release of new Windows 8 PCs and tablets, the next version of Office, and a wide array of products and services for the enterprise and consumers, we will be delivering exceptional value to all our customers in the year ahead." You go guy!

Mighty Microsoft needs to step up more in 2012. Management has marshaled their mega resources so the Empire can strike back. Total assets are now a record $118.01 billion. Apple, HP, and IBM are the other exclusive members of the Big Tech $100 Billion Club. However, the revolution is in progress. The mobile and open-source rebels have made tremendous gains and are at the gates.

Microsoft Income Statement Calendar Q1 2012 Microsoft reported total revenues of $17.41 billion, net income of $5.11 billion, and earnings per share of $0.60. From the prior calendar quarter Q4 2011, these were -17%, -23%, and -23%. From the prior calendar year Q1 2011, these were up +6%, -2%, and -2%, respectively. Gross margin increased QoQ and YoY to 77.30%. Operating margin dipped QoQ but increased YoY to 36.62%. Net margin dropped QoQ and YoY to 29.34%. Cash flow from operations per share increased cyclically to a record $1.13.

Microsoft Balance Sheet Calendar Q1 2012 Total assets increased to a record $118.01 billion. The capital ratio increased to a multi-year high of 58.18%. The current ratio is a very liquid 65.13%. Microsoft is very liquid with strong capital and has $59.53 billion in cash reserves (cash, cash equivalents, and marketable securities). Add noncurrent investments and the reserves are $68.60 billion. Return on assets are a 10-quarter low of 21.37%, which is still excellent. The debt ratio is stable and reasonable at 10.12% of total assets.

Microsoft Business Outlook Microsoft is revising operating expense guidance downward and now offers a range of $28.3 billion to $28.7 billion for the full year ending June 30, 2012. Microsoft also offers preliminary fiscal year 2013 operating expense guidance of $30.3 billion to $30.9 billion, representing 6% to 8% growth from the mid-point of fiscal year 2012 guidance.

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