Cisco Financials and More Oracle and Sun News

 

Cisco Systems Inc. reported their third quarter financials, which showed a double-digit drop in revenues and earnings. Oracle Corp.'s CEO clarified his position on the firm's intent as it relates to its recent acquisition announcement of Sun Microsystems Inc.; meanwhile, Sun revealed its first major software upgrade for its Sun Storage 7000 Series as well as Unified Storage hardware capacity enhancements.

Focal Points:

• Cisco reported total revenues for the third quarter dropped 16.6 percent year-over-year to $8.2 billion. Net income for the quarter on a GAAP basis was $1.3 billion or $0.23 per diluted share, a decline of 24 percent. Routing revenues were down 32 percent year-over-year; switching revenues decreased 20 percent, and advanced technologies dropped 12 percent. On a geographic basis total revenue decreased across all regions on a year-over-year basis. Quarterly revenue ranged from minus 14 percent in the European Markets and Japan to minus 22 percent for the Asia Pacific and the Emerging Markets theater. The U.S. and Canada region was down 15 percent.
• Oracle posted on its Web site the transcript of an interview by CEO Larry Ellison that clarified the company's position on a number of key elements. He stated the firm is definitely not going to exit the hardware business. He believes that Oracle can enjoy high hardware margins, like Apple Inc. and Cisco, by doing a good job of designing hardware and software to work together. He further stated that the company would continue the SPARC chips and that "our primary reason for designing our own chips is to build computers with the very best performance, reliability and security available in the market. Some system features work much better if they are implemented in silicon rather than software. Once we own Sun, we'll be able to plan and synchronize new features from silicon to software." Similarly, Oracle will keep the disk and tape storage lines because they are critical components in high-performance, high-reliability, high-security database systems. Lastly, Oracle will hold onto the hardware engineers and combine them with the hundreds of other engineers that Oracle brought in from systems companies like Hewlett-Packard Co. and IBM Corp.
• Sun announced hardware capacity enhancements to the Sun Unified Storage family and an upgrade to its analytics software, which ships with the Sun Storage 7000 line. Sun doubled the capacity of Sun Storage 7110 system, from two to four terabytes, and more than tripled the capacity of Sun Storage 7210 system to 142 terabytes. These new storage systems also leverage solid state disk flash technology. The software upgrade offers more than 15 new features that enhance their analytics capabilities and Microsoft Corp. Windows integration. There are new data protocols, data services, and features such as FTP and SFTP analytics, Active Directory cross-forest authentication, and workflow automation.

Experton Group believes Cisco and Oracle are striving for unique corporate visions that have differentiated strategies and business models. Both companies constantly tune these to take advantage of business, market, and technology changes. However, the current economic environment is stress testing Cisco's model more than it has had to endure before while Oracle's leap into being a hardware and "one stop shop" provider may challenge the company far greater than expected. IT executives should use these uncertain times to press vendors for better deals and guarantees, especially from exposures due to migrations from Sun solutions or to untried, untested platforms.