Daily Archives: November 2, 2009

Calderoni Interview Feeds Further Speculation on Cisco Smartphone

Over at CFO Magazine, they’re running an interview with Frank Calderoni, EVP and CFO at Cisco Systems.

You can peruse the interview in its entirety at the URL provided above.

One of Calderoni’s comments that caught my eye was his remark that Cisco’s “long-term business model anticipates annual revenue growth of 12% to 17%.” The interviewer, Edward Teach (no, not that Edward Teach), replies reasonably that those numbers seem ambitious for a company with revenue of $36 billion.

Calderoni replies as follows:

We feel confident that that’s the opportunity for us ahead. We mentioned the data center. Video is another area that we are very optimistic about. There has been a tremendous amount of growth in video usage, and that’s going to continue for a long time.

In other words, Cisco isn’t looking to achieve its ambitious objectives through incremental growth from its existing product portfolio in its existing enterprise and carrier markets. Instead, it will depend on new products and services in adjacent markets where Cisco currently is not a major presence.

Those comments set the stage for Calderoni’s discussion of consumer markets. Said the Cisco CFO:

The consumer is a key part of our strategy. Consumers are constantly driving video demand; they want the ability to access video anywhere, anytime, and on any device. Our consumer business, which today consists of our Linksys product line and Pure Digital and the Flip video camera, will give us the ability to leverage the network in the home or in business interchangeably.

Now consider Cisco’s Starent and pending Tandberg acquisitions, and give some thought to Cisco’s interest in making it possible for consumers to enjoy access to video “anywhere, anytime, and on any device.” Connect those dots to speculative reports of a Cisco smartphone, and suddenly that particular possibility seems neither speculative nor unlikely.

Mark Sue of RBC Capital Markets said earlier this year that a Cisco smartphone might reach market by the middle of 2010. That projection doesn’t seem farfetched in light of recent developments.

If Cisco moves in that direction, one wonders whether it will do so organically, through enhancements and extensions to its Pure Digital Flip mobile-video camera, or whether it will acquire a company already in the smartphone space.

Either option is possible. Regardless of how Cisco proceeds, we shouldn’t be surprised if the company barrels into the smartphone market within the next year.

Fortinet IPO All Set to Go

With the price range and size of Fortinet’s initial public offering (IPO) all set, we now await the first trades, which almost certainly will occur before U.S. Thanksgiving. At least some of the smart money believes Fortinet will be trading under its “FTNT” symbol in a little more than two weeks.

Fortinet expects to sell 12 million shares for between $9 and $11 apiece. Based on a midpoint price of $10, the IPO is expected to raise $120 million, according to a Reuters report.

Of the shares reaching market, about 52 percent are being sold by the Silicon Valley firm’s financial backers, leaving Fortinet with expected net proceeds of approximately $52.4 million. The company’s executives and directors own 59 percent of the company, while venture-capital firm Redpoint Ventures owns 15.2 percent and Meritech Capital holds 10.8 percent, according to the prospectus. Other investors include Acorn Campus Ventures, Defta Partners, DCM, and WI Harper Group.

The Deal.com reports that Fortinet raised more than $93 million in aggregate VC funding, whereas PEHub says the company has raised $83 million in VC funding since 2002.

Morgan Stanley, J.P. Morgan, and Deutsche Bank Securities are serving as co-lead underwriters; they will be given the option of purchasing an additional 1.8 million shares.

Ballmer: Get Used to “New Normal”

As Microsoft CEO Steve Ballmer continues his worldwide promotional tour on behalf of Windows 7, he is reminding all within earshot that the worldwide economy, at least as it pertains to information technology, isn’t about to spring back to its past glories.

Ballmer made his latest dire economic pronouncements while in South Korea, but he’s made similar statements previously. He’s actually been strikingly consistent in his gloom.

For what’s it worth, I think Ballmer is right. The golden days of corporate IT spending will not return for some time.

As Ballmer says, we must adapt to the “new normal.”

In comments reported by Associated Press (AP), Ballmer said:

“The economy went through a set of changes on a global basis over the course of the last year which are, I think is fair to say, once in a lifetime . . . . ”

“While we will see growth, we will not see recovery.”

Ballmer soft sells us a little here. The global economy did go through a set of changes, but some of those are permanent and they will be with us indefinitely.

It’s difficult, for example, to envision the American consumer ever returning to his or her role of profligate, voracious buyer of foreign-made goods. A new reality has been forced upon the overstretched, tapped-out American consumer, and that has occasioned a new reality for all the businesses — including a great many large corporations — that depended on extravagant American consumption.

Getting back to Ballmer, he said corporate purchases of PCs and servers were down about 15 percent globally, and he emphasized that CEOs “have much more tightly constrained IT budgets.”

Agence France Press (AFP) reported additional Ballmer remarks made during the same address. According to AFP, Ballmer said:

“With capital more scarce, we know IT budgets are more scarce. There is going to be pressure in businesses to drive for a new level of efficiency.”

“So it’s important that we’re not saying we just had a crisis and we are going to have a recovery. We are going to live in what we like to call the new normal. The new normal will be a more scarce environment than we saw a year, two years, three years ago. While we will see growth, we will not see recovery.”

It isn’t all darkness, however. Ballmer sees WIndows 7 playing a significant role in helping companies “do more with less.” On that theme, he emphasized the cloud-computing and virtualization capabilities of Windows 7, which Ballmer said would help companies lower hardware costs and save on energy expenditures.

At the end of the day, Microsoft sees a sliver lining in the dark, heavy economic clouds that seem firmly anchored above us.