Cisco Systems Inc Q1 2015 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Simona Jankowski - Goldman Sachs - Analyst : I just wanted to ask you first about your product order growth. I think you said up 1% year-over-year. That comes on the back of relatively easy comps, relative to the year ago number. And on our math it implies that sequentially bookings declined something like the mid-teens which I think would be well below normal seasonality for this quarter. So just curious if you can give us a little more color on the puts and takes in there, if you can touch on FX? China seemed to decline at a little faster rate, and how much of that was some of the weakness in the US carrier space that you referenced?

Question: Amitabh Passi - UBS - Analyst : Frank, first, sorry to see you go but wishing you all the best. And John, I just wanted to clarify on the guidance maybe picking off of the previous question. Your guidance implies about a 4% decline in revenues. Again, should we assume that most of that, in fact all of that pressure is from service provider and emerging markets? Are you seeing maybe potential, some slowing momentum in your switching side as well, or should we expect that to continue to remain robust? I just want clarify what's embedded in the guidance.

Question: Brian Modoff - Deutsche Bank - Analyst : Frank, congratulations on your retirement, and good luck dealing with us, Kelly. So a question on the gross margins. 63% guidance is decent, as well. How do you see your gross margins? I know some of the calls have been that you would see pressure there, doesn't look like you have. Looking at your mix and your forecast, how do you see your gross margins panning out over the next quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2014 / 9:30PM, CSCO.OQ - Q1 2015 Cisco Systems Inc Earnings Call And real quick if I could slip in, you mentioned General Motors again. Can you talk about what that means in terms of your ability to sell into big US and European telcos, and software opportunities, in terms of offering that type of product pipeline to them to sell to their customers? And how it might be as a recurring revenue stream over time? Thanks.

Question: Ehud Gelblum - Citigroup - Analyst : Frank, likewise. Best of luck. Just an aside on that, if you can give us some sense of your thought process, as to A, what you plan on doing next, and what you were thinking as you went through this decision to retire, that would be some awesome, to just have some rationale. But I was looking more for some a little more deep dive into the enterprise business, where enterprise orders were down from being up last quarter, and putting that together with what's happening with VCE. And with the data center number 15%, that John said you thought was a little disappointing and I think it was about 30% last quarter. So putting that all together in one piece, can you give us a sense as to A, just a question A, how much UCS went through VCE and how much will that impact you as your piece of the VCE goes to 10% from 35%? B, were all of these issues related, the low enterprises growth, the low UCS and data center growth? And the exiting bringing down your equity stake in VCE, was that all the same issue? And what gives you confidence that all of these issues, enterprise, UCS, data center, et cetera, rebound next quarter and going forward? Thanks.

Question: Ben Reitzes - Barclays Capital - Analyst : John, could you talk a little bit more there about service provider? When -- what do you need to see to have it turn? I thought that was interesting, that you talked about net neutrality, which is obviously a hot button issue right now. And obviously the spending, but I think we're all trying to figure out when it could possibly turn. It sounds like there's several factors, and your leadership on this issue, I think, would be very helpful to us. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2014 / 9:30PM, CSCO.OQ - Q1 2015 Cisco Systems Inc Earnings Call

Question: Mark Sue - RBC Capital Markets - Analyst : At a high level, the patterns that we are seeing today is somewhat similar, you have some regions positive, some regions negative, and then we are seeing a subsequent reversion to the mean. Are there considerations to really think about, can Cisco do things very differently, make big changes, so that all efforts that Cisco's making can lead to a corresponding out-performance? In terms of economic value add and also equity REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2014 / 9:30PM, CSCO.OQ - Q1 2015 Cisco Systems Inc Earnings Call out-performance for Cisco? In terms of looking at unlocking value, are there discussions going on, are we at a point where Cisco will consider new inputs to change and formulate a better outcome?

Question: James Faucette - Morgan Stanley - Analyst : Wanted to go back to the question that was asked earlier on margins. Just wondering how we should think about the opportunity to improve profitability. It seems like we're on the backside of a multi-year revamping of the internal organizational structure, like you just hit on, John. I'm wondering if there's an opportunity to see some margin expansion as year-over-year growth persists? Or maybe to ask another way, what kind of top line growth do you think we would need to achieve in order to show some margin expansion and improved profitability as we get to the latter stages of the reorganization we've been under, that's been underway for the last three years?

Question: Alex Henderson - Needham & Company - Analyst : I was hoping you could give us a little bit more granularity on the service provider segment. The piece that is confounding the analysis to some extent is the set-top box business, continuing to fall off. And it's fallen off so many quarters in a row, it's lost track of how big it is. Can you talk about what the service provider business would be doing ex the set-top box on an apples-to-apples basis, because that piece has obviously got a different trajectory?

Question: Ittai Kidron - Oppenheimer & Co. - Analyst : Frank, best wishes to you, and thanks for the many years of very good service and good luck to Kelly. I wanted to go back to the point of gross margin, John, if possible. And I've heard all explanations around it, but I have to go back literally to three years to find a point in time where you had a product gross margin this high. And then, I looked at your guidance over the past few quarters and years and you've beaten gross margin 10 quarters out of the last 13 quarters, you never missed in the last 13 quarters. I'm wondering, have gotten to a point in time where you feel that you have a much better handle on the product cycles, you have a much better handle on the competitive front? What is the possibility that you actually do start raising that gross margin range outlook going forward? Is that something completely unreasonable to assume?