Category Archives: OCT 2011 Earnings

October 2011 Earnings 1.1: RIMM, RVBD, ERIC, ATT, CSCO

. CAPEX, CDNs, OCT 2011 Earnings, OTT . 1 Comment

A few reactions to reports from yesterday, this morning and other news:

RIMM: I got an email last night asking me if I was following the activists who are posturing for changes at RIMM and one of their proposals was to break up the company into three companies: devices, networks and patents?  I have no idea how or why you would want to separate networks from devices, this is not NOK or ERIC with large independent business units.  RIMM’s devices are directly tied to their NOC operations.  I do not think that separation is even possible.  It is beyond me why people with a poor understanding of the company’s technical operations are promoted by various media outlets when all they are doing is talking their book.

RVBD: The numbers look fine.  I was thinking about a theory on RVBD that if there is a slowing trend of spending in enterprises, that RVBD should do better in that environment as they provide a lower cost solution that extends the life of the current network and enables enterprises to put off upgrades which is what is really needed to solve network performance issues.  In time, I think RVBD’s WAN acceleration will go the way of the distributed CDN, but this is probably a few years out.

ERIC: Wow…those margins suck, but I would say that mid-30s is going to be the new normal over the LT and some companies will need to adjust to that trend.

ATT: The CAPEX number is out and it is $5,220B for Q3.  Waves of relief emails are pouring into my inbox.  I have been bearish on ATT CAPEX, as noted in prior posts, and I still think something is amiss based on APKT, PWAV and JNPR commentary.  I would say that I modeled ATT CAPEX to be a little ahead of this number and if ATT still plans to spend to $20B in CAPEX, then the Q4 number should come in around $5,300-5,340B.  In all, that still tells me that multiples are going to be finishing their correction, contraction process.  The CFO will probably make a statement on CAPEX later this morning on their call.  I have updated the charts I posted in July and added a simple chart of ATT CAPEX back to 2002.  The wireless revenue miss is going to cause all sorts of questions to be asked.  Does this mean they have made enough investment in wireless or not enough?  I will wait to make a final call on ATT CAPEX until I hear from CSCO in November and CIEN in December.

CSCO: Acquired private company in which they had previously made an investment.  This is just further evidence of a content deep networking trend and that CDNs can easily be built by service providers.  I covered all this is prior posts.

/wrk

* It is all about the network stupid, because it is all about compute. *

** Comments are always welcome in the comments section or in private.  Just hover over the Gravatar image and click for email. ** 

October 2011 Earnings 1.0

. OCT 2011 Earnings, Portfolio . Leave a comment

Here is the start of my October 2011 earnings thread.  I am already a bit late having been positive on GOOG from the past, I did tweet it last week.  A few reactions so far:

GOOG: Sticking with my GOOG call from April, not much to update.

INTC: I have been positive on INTC based on my web 3.0 thesis.  It will be interesting to see if results were strong enough to break INTC out of the ten year down channel on a weekly basis.  Need a close above $22, but a close above $23.16 on a weekly basis would be a strong signal as that is the 38.2% Fibb going back to 2002.  I pitched this stock and thesis to a PM in NYC in September and he laughed at me.  Who is laughing now?

AAPL: I still like the product cycles and would be a buyer as it settles.  It is all about product cycles.

JNPR: JNPR was defiantly on the mind when I was thinking about my web 3.0 thesis and Moore’s Law exhaustion.  I read about fifteen reports on JNPR this morning, which is probably ten too many.  I would start by saying I think the company is in the midst of (i) product, (ii) market and (iii) leadership transitions.  These three forces need to harmonize for the company to go on a run and I do not see that happening for some time.

INFN: The company is making a bet on 100G and that they have the ability to scale their business to be a supplier in size to tier 1 service providers.  One cannot criticize the company for not taking on difficult endeavors.

APKT: Waiting on the official results after the pre neg which I posted about here.

YHOO: I think this stock is un-investible.  Negative product cycles and poor leadership; are there any other questions?

PWAV: I posted some thoughts on that last night.

MACRO: The market is really difficult to deal with on a daily and weekly basis.  It reminds me so much of 2008, even though I see people on CNBC who say it is not 2008.  I have posted on this in the past, but I will add when the market swings on reports from news outlets like Reuters, CNBC, WSJ and government officials and central bankers, we might as well appoint a Committee of Public Safety and start the Reign of Terror.

I will endeavor to post additional updates to this tread over the next few days.

Stocks of interest in the next few days:

10.19: RVBD, WDC

10.20: NOK, ERIC, T, STX, MSFT

10.21: GE, VZ

/wrk

* It is all about the network stupid, because it is all about compute. *

** Comments are always welcome in the comments section or in private.  Just hover over the Gravatar image and click for email. ** 

Powerwave and AT&T CAPEX

. CAPEX, OCT 2011 Earnings . 2 Comments

Almost two weeks ago I posted about APKT and AT&T CAPEX.  You can read it here.  I wrote “Two days ago APKT pre-announced a Q3 miss due to a delayed order from AT&T.  The question is why did AT&T push out an order from Q3 to Q4 as the CEO stated?  Was it just a delayed PO in a larger multi-vendor deal or something else?  There is another theory that occurred to me today and that is ATT is in the middle of a fight with the DoJ over acquiring T-Mobile.  When a company spends $20B a year in CAPEX and has 294k employees, it has the assets to make a statement.  It is just a possibility.”

After the close PWAV guided Q3 revenues to be -60% from prior guidance.  On the call, the CEO clearly stated “…in the North American market, we believe that the uncertainty has been added to the market, given the government’s recent opposition to the proposed merger of AT&T and T-Mobile, which we believe has led to delays in spending of these operators, and they are reevaluating their capital spending plans.”

The question is how significant and broad are these delays?  JNPR reported tonight and the results do not seem to reflect any additional weakness than what was already expected.  In two days we will get the full AT&T and we might be able to see if there is a CAPEX slowdown or a shift in spending priorities.

/wrk

* It is all about the network stupid, because it is all about compute. *

** Comments are always welcome in the comments section or in private.  Just hover over the Gravatar image and click for email. ** 

CAPEX Thoughts Ahead of Q3 Earnings

. CAPEX, OCT 2011 Earnings . 3 Comments

Next week starts tech earnings and we will get a lot of data points on service provider CAPEX in the US.  I am going to make the assumption that Asiais fine and EMEA is soft, so anything worse or better will be a surprise.  What I want to know is what is going on in the US.  There are few reasons for my curiosity.  The first data point was NTAP’s CFO, Steve Gomo at the Deutsche Bank Tech Conference on September 14.  He said “…there’s I guess some minor mindset out there that thinks that they’ve [Financials] purchased so much that they’re kind of on a pause, they’re digesting what they’ve purchased. I don’t think we’re in that category. We’re pretty close to some of these very large banks, again nine of them we consider major accounts, where we have major accounts we have executive sponsorships and whatnot. So we’re very close.  And what we’re seeing is literally reduction in spend. And somewhat dramatic reduction in spend. And I’m not going to name names here, but we have several banks that have told us that they’ve been asked to cut back billions or $500 million type of spend out of their IT budget between now and the end of their fiscal years.”  What concerns me about this statement is if this spending reduction is being seen by the enterprise sales teams of large service providers (an if statement) then they will slow role CAPEX in 2H of the year.  To reiterate, this is an unproven assumption.

Two days ago APKT pre-announced a Q3 miss due to a delayed order from AT&T.  The question is why did AT&T push out an order from Q3 to Q4 as the CEO stated?  Was it just a delayedPOin a larger multi-vendor deal or something else?  There is another theory that occurred to me today and that is ATT is in the middle of a fight with the DoJ over acquiring T-Mobile.  When a company spends $20B a year in CAPEX and has 294k employees, it has the assets to make a statement.  It is just a possibility.

There have been no other significant negative pre-announcements by networking companies in the quarter to scale of APKT, so it is very plausible that this was just a one off event.  However, I would remind readers of what I wrote back in July about CAPEX.  Maybe I was not clear in my July post so I will try to be clear now.  I think there is real risk that 2011 is a year in which CAPEX ran hot in the 1H and will be slow in the 2H.  Maybe this has been priced into the street already – then again maybe it has not.

We will start to acquire data points next week:

–         ADTN on 10.12

–         JNPR on 10.18

–         T on 10.20

–         VZ on 10.21

–         TLAB on 10.25

–         ALU on 11.04

–         CSCO 11.09

/wrk

* It is all about the network stupid, because it is all about compute. *

** Comments are always welcome in the comments section or in private.  Just hover over the Gravatar image and click for email. **