** This is not Financial Advice, so do your own due diligence ** I have been a long time Cisco bull --like forever -- but I was disappointed by CSCO's latest earnings call. I fear, Street is over-modeling FY26 rev growth of >5% Y/Y.. if the past is any indicator, CSCO just cannot sustain over 1% CAGR growth, let alone the 5+% CAGR over a 3 year period. Opinions aside, facts are CSCO 3 yr CAGR is ~1% (70bps to be exact) vs the 5 - 7% CAGR it guided, which btw the company lowered after first offering 7 - 9% CAGR they guided to--even with the backdrop of COVID-led enterprise refresh. Hard to see CSCO's campus opportunity growing here, I'd rather argue we just went through a peak cycle as is evident from the Peak Gross Margins for both CSCO and SPLK. Plus Jayshree Ullal and team at Arista Networks are eating away share in the Fortune-100. $PANW's pjatformization play will likely take a bite out of CSCO's security story, which frankly took too long for CSCO to right! integrating point solutions and stitching them together just doesnt work in security-- CSCO should borrow a page from $FTNT on how to organically grow in security. CSCO has a lot of work ahead of them, SPLK had been on the block for so long, its previous mgmt. significantly under-invested in SPLK and so now CSCO has to step up and drive incremental Opex. Beyond incremental opex, the higher interest rate expense is gonna eat away the EPS.. Streets ~$3.70 FY26 EPS is too high.. would be lucky if they get to $3.50. You know CSCO is in trouble when they got out of their comfort zone of tuck-in acquisitions (typically less than $3B) and bought SPLK for $28B! Remember, Harvard Business School wrote a case study on CSCO's "innovation through acquisition" untill John Chambers disastrous acquisition of Linksys (to expand into consumer market). History is clear the Linksys acquisition was a disaster. Look M&A is hard, Tech M&A is even harder and large tech M&A is next to impossible to be successful. To be fair, CSCO has out executed in the past, its track record in M&A is simply outstanding, one of the reasons why CSCO is still as relevant today as it was during the hight of the "dot com" bubble. CSCO rightfully belonged in the tech leader with the likes of $MSFT, $ORCL. But with the SPLK deal odds are against them -- i suspect this deal was dont by "financial heads" vs the "product leaders". Sure SPLK was big enough to drive a step function improvement in CSCO's software revenue story.. but it also comes with a set of challenges that CSCO is not accustomed to. Odds are against CSCO this time.
Fahad Najam’s Post
More Relevant Posts
-
𝐂𝐢𝐬𝐜𝐨 $𝟐𝟖𝐁 𝐦𝐞𝐠𝐚 𝐚𝐜𝐪𝐮𝐢𝐬𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐒𝐩𝐥𝐮𝐧𝐤 ⬤ Cisco intends to acquire Splunk for $157 per share in price, representing approximately $28 billion in equity. ⬤ Combined, Cisco and Splunk will become one of the world's largest software companies and will accelerate Cisco's business transformation to more recurring revenue. ⬤ Expected to be cash flow positive and gross margin accretive in the first fiscal year post close, and non-GAAP EPS accretive in year two. Will accelerate revenue growth and gross margin expansion. ⬤ Unites two "Great Places to Work" similar values, strong cultures, and talented teams ⬤ The combination of these two innovative leaders makes them well positioned to lead in security and observability in the age of AI I thought this was a very well-timed acquisition because it takes advantage of the rapid adoption of generative AI and the increasing number of threats companies could face in multi-cloud architectures. Together, Cisco and Splunk's complementary capabilities will allow them to offer a wider portfolio of services, increasing their end-user customer base, and ultimately generate incremental revenue. They are also able to leverage their economies of scale to share common expenses, accelerate research and development efforts, and allow for greater investments in new solutions. If you've made it this far, I appreciate it ... word on the street was someone turned $22k into $10M in a day: "Splunk was trading at ~$120, they bought $127 call options that expire tomorrow. (Call options give the holder the right to buy 100 shares of a company at a specific price, known as the strike price, up until the expiration date, so it's highly leveraged, juicing up your returns) Cisco announced the acquisition and now it's trading at $145; quick 45,650% return in a day ." - Sheel Mohnot 𝐒𝐨𝐮𝐫𝐜𝐞𝐬: Press Release on Cisco Website, All-In Podcast, Sheel Mohnot
To view or add a comment, sign in
-
-
Advocate on Record at Supreme Court of India, Competition & Antitrust Lawyer and Registered Indian Patent Agent
The recent Bloomberg article by Katharine Gemmell on June 19, 2024 reports on Hewlett Packard Enterprise Co. (HPE)'s significant $14 billion acquisition of Juniper Networks Inc., a strategic move that aims to bolster HPE's footprint in the networking sector. This acquisition, involving a cash transaction valued at $40 per share, signifies a substantial investment by HPE in expanding its capabilities in producing networking devices such as routers and switches—critical components for directing information flow across networks and the internet. However, the deal has caught the attention of the UK's Competition and Markets Authority (CMA), which has initiated a merger inquiry. The purpose of this investigation is to determine whether the acquisition could potentially harm competition within the market. The CMA has set a deadline of August 14 to decide if a more comprehensive probe is warranted. The competitive landscape in the networking technology market, dominated by major players like Cisco Systems Inc., could be significantly impacted by this merger. The concern is that such consolidation might lead to reduced competition, potentially affecting pricing, innovation, and customer choice. HPE's move to acquire Juniper is strategic, likely aimed at enhancing its competitive edge against giants like Cisco by integrating Juniper's advanced networking solutions into its own product portfolio. This could enable HPE to offer more comprehensive and competitive networking solutions to its clients, thus positioning itself more robustly in the market. The outcome of the CMA's investigation will be crucial in determining whether this deal will proceed without restrictions or if it will face conditions to preserve competitive market dynamics.T
Juniper Networks Helps Complement HPE, Neri Says
https://www.youtube.com/
To view or add a comment, sign in
-
Was HPE’s $14B Juniper acquisition a wise move? Two weeks later, investors look little than enthused When HPE announced its volition to acquire Juniper Networks for $14 cardinal successful cold, hard currency earlier this month, it was a spot of a shock. Sure, HP had already bought Aruba successful 2015 for astir $3 billion. Grabbing different networking institution would presumably conscionable adhd different furniture to that business. Of course, determination are ever complications incorporating 1 ample enactment into another, and HP doesn’t precisely person the champion grounds for being a creaseless operator wherever that’s acrophobic implicit the years. But surprisingly, the companies didn’t presumption this conscious coupling arsenic a axenic networking play. In fact, successful a blog station announcing the deal, Juniper CEO Rami Rahim suggested it was much astir AI. “This operation with HPE is expected to alteration america to present much comprehensive, much competitive, genuinely end-to-end experience-first AI-native solutions,” helium wrote. Regardless of however you presumption it, the deal, which pays $40 a share, oregon a 32% premium implicit the closing terms connected January 8 (per CNBC), represented the benignant of connection that was hard for Juniper to refuse. Assuming regulators don’t entity — not precisely a fixed these days — this woody could adjacent aboriginal this twelvemonth oregon aboriginal next. They are giving a batch of wiggle country for regulatory oversight. Since the woody was announced connected January 12, HPE investors look lukewarm astir it; that is, if the banal terms is immoderate denotation of their sentiment. Consider that connected January 8, the time the WSJ broke the news that a woody betwixt the 2 companies was imminent, the banal terms sat astatine $17.72 a share. By January 12, erstwhile the woody was officially announced, the terms was down to $15.89, and it has been wallowing determination ever since, closing Thursday astatine $15.92, down astir 8% for the month. That’s not precisely a ringing endorsement. With a mates of weeks successful the rearview to digest this deal, we decided to look astatine conscionable what this was about, and whether investors should possibly beryllium a small much affirmative astir it. As you’ll see, the companies deliberation the numbers look beauteous good, and they truly bash lucifer up good (so agelong arsenic HPE doesn’t messiness it up). Is it truly astir AI? It’s hard to find thing these days successful tech that isn’t being positioned with an AI focus, truthful it shouldn’t travel arsenic a astonishment that the companies are making AI the centerpiece of this deal. But is that truly accurate? https://ift.tt/7rxhk3g
To view or add a comment, sign in
-
There you go folks, first, out of many companies that have the same fear. While #hpe and #juniper were pretty clear on the acquisition (looks more like a merge than a sell), #broadcom is doing its best to send all the bad signs to the partners and customers. In all honesty, we didn't get so many info on hpe/juniper sell, but somehow the vibes are more positive than negative. At least as for the Ent/DC part goes. The SP part is kinda gray area atm. https://lnkd.in/gXq6kqY5
WWT CEO On ‘Disappointing’ VMware-Broadcom Strategy And ‘Positive’ HPE-Juniper Merger
crn.com
To view or add a comment, sign in
-
NEW It's been a busy few weeks for Synchronoss Technologies, and the company believes it is now on track for growth after years of struggling. Synchronoss announced the sale of its messaging and network logistics businesses to Lumine Group for $41.8 million. It also signed a new cloud deal with SoftBank, inked renewed cloud agreements with AT&T and Verizon, and laid off an unspecified number of employees. "This planned strategic move [to sell the businesses] positions Synchronoss as a higher-margin, cloud-only business," said CEO Jeff Miller this week during his company's quarterly conference call, according to Seeking Alpha. "It also fortifies our capital structure and positions our organization for long-term growth with even higher incremental margins and improved cash conversion." As a result, Synchronoss is now targeting revenue growth of 5% to 8% next year, after seeing revenue decline during the past three years. https://lnkd.in/gcCudUCH
Synchronoss slims down, targets cloud-based future
lightreading.com
To view or add a comment, sign in
-
Pro-choice atheist - never owned a gun, believe in capitalism & in freedom of speech. Private Retail Investor and Day Trader worth upwards of 110m$, so cancel me!
On the face of it, it looks like Juniper will benefit from HPE’s massive network of channel partners, but if there is one thing we’ve learned from the Tech M&A ecosystem, it is simple this - appearances can be deceptive. I predict some volatility risks through the course of 2024, and perhaps well into 2025 - . Approval for this union will likely be delayed, especially from countries where the US has increasingly tense geopolitical relationships. . Lack of clarity in the Channel on what HPE and Juniper will do with the inconvenient overlap in their portfolios - especially, wireless and LAN switching - HPE Wireless, Juniper MIST Wireless, Aruba Wireless, LAN switching from HPE, from Aruba and now enterprise switching from Juniper. While the overlap presents opportunities for portfolio rationalization, untill there is reasonable clarity from leadership on what that rationalization is likely to look like, the channel will be skeptical investing heavily on any of the product families. It is important to keep in mind that HPE has promised $435m in “synergies”. So, while this represents a short-term win for any of HPE and Juniper’s investors, in the long-term, the prospects do not look too bright for Juniper’s employees, and that is the brutal reality. Finally, it is important to acknowledge that HPE is not Cisco. And Juniper has, for all practical purposes, failed in its 20 year long quest to take on Cisco for pole position in networking - not happening. A look at all the acquisition casualities of the HPE juggernaut over the years - https://lnkd.in/gYm-52yT - will remind us on how bad HPE’s success rate has been with M&A. My consensus - We are already short Juniper. Channel revenue for Juniper will suffer in 2024. And if the deal fails approval, it could be a violent spin to the short side. HPE will continue to be HPE, a monster muddled by messy execution, and a mere shadow of its once glorious past. Prospects looks bright for Cisco, and I would watch out for Huawei, lurking in the shadows, waiting for an opportunity. And yes, I am long HPE, there is only one way this goes when shit hits the roof for Juniper. #HPEJuniperMerger #TechIndustryNews #BusinessCollaboration #NetworkingSolutions #EnterpriseTechnology #ITMerger #DigitalTransformation #TechPartnership #InnovationInTech #CorporateStrategy
List of acquisitions by Hewlett-Packard - Wikipedia
en.wikipedia.org
To view or add a comment, sign in
-
Professional supplier of electronic components (ICs,Capacitors,Resistors,Connectors,Transistors,Diodes)
Broadcom, the chipmaker, is close to closing a $3.8 billion deal to sell its remote access business, which allows users to access desktops and applications from any device, to the private equity firm KKR, according to people familiar with the matter. The potential deal represents Broadcom CEO Hock Tan's efforts to streamline the company's portfolio following the $69 billion acquisition of software maker VMware in November 2023. according to people familiar with the matter.KKR has outplayed other private equity firms, including EQT, in its bid for the EUC unit. The deal could be announced as early as February 26. according to people familiar with the matter.Evercore, Deutsche Bank and Jefferies advised KKR on the deal, while Citigroup advised Broadcom. The capital markets arm of UBS, Jefferies and KKR will provide debt financing for the transaction. Broadcom said in December 2023 it would seek to spin off its end-user computing division. In addition, the company is trying to spin off VMware's security software business, Carbon Black. KKR is no stranger to deals in the software industry. In 2018, the company acquired US business software company BMC for $8.5 billion, and two years later merged BMC with Compuware, which it acquired from buyout firm Thoma Bravo. In 2021,KKR acquired information services technology provider Ensono for about $1.7 billion from private equity firms Charlesbank Capital Partners and M/C Partners.
To view or add a comment, sign in
-
-
Competition Watchdog Probes Juniper Networks and HPE Deal 📌 The UK’s Competition and Markets Authority (CMA) has initiated a Phase 1 investigation into Hewlett Packard Enterprise’s (HPE) proposed acquisition of #JuniperNetworks. The deal, valued at approximately $14 billion, involves HPE purchasing Juniper Networks for $40.00 per share in an all-cash transaction. This investigation will assess the potential impact of the acquisition on market competition. 🌐🛜 Read more on: https://lnkd.in/emYThFt5
Competition Watchdog Probes Juniper Networks and HPE Deal - ISPreview UK
https://www.ispreview.co.uk
To view or add a comment, sign in