Technology

Why This Analyst Team Sees Cisco and Juniper Both Winning Simultaneously

All in all, Merrill Lynch thinks that Cisco is executing well in a tough environment and new products should contribute to growth in key segments. They also like Cisco’s cash flow generation, low relative valuations and dividend yield. The team further liked to see a strong seasonal recovery in routing, sequential growth in SP Video, product gross margins increased and strong U.S. sales. Still, the growth was not consistent across all regions, with 8% U.S. growth being dragged down by 2% growth in EMEA and a 1% drop in APAC sales.

Below are comments from each company’s earnings reports. Juniper issued preliminary earnings on April 23 and Cisco’s report was on May 13.

Juniper’s CEO Rami Rahim said:

We are off to a good start to 2015, delivering solid results for the first quarter and making significant progress against our key initiatives for the year. Our sharpened focus resulted in improved execution and momentum across our key customer verticals. Over the past few months, we announced enhancements to our portfolio with a new lineup of breakthrough-performance networking and security products and garnered several new design wins, with more anticipated in the pipeline. We are focused on profitable growth and driving forward our innovation engine, and believe we are well positioned in achieving our goal of realizing Juniper’s full potential.

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Juniper’s Robyn Denholm, chief financial and operations officer, said:

During the quarter, we delivered good year-over-year non-GAAP operating margin and earnings per share expansion, through continued management of our cost structure. We also continue to benefit from our focus on customer diversification and we see broader healthy demand trends beginning to emerge. Meanwhile, we continue to deliver on our capital return commitments, driving additional shareholder value.

John Chambers, the exiting CEO of Cisco, said:

Cisco is in a very strong position and we delivered another solid quarter. Our vision and strategy are working and we are executing very well in a tough environment, as evidenced in our revenue growth, profitability, strong gross margins and cash generation. Our customers feel the pace of change and disruption in every industry and market, and know their success depends on digitizing their business. Whether they are the disruptor or the incumbent, they are coming to Cisco as their strategic partner. We believe we are pulling away from our competition using the same formula we’ve always used: integrating our industry-leading products in every category into architectures and solutions that deliver real outcomes. We’ve created this opportunity and it is ours to execute.

I am extremely honored and proud to have led Cisco for the last 20 years and to get us to this positive inflection point. We have a tremendous opportunity to extend our lead in the industry, and with Chuck Robbins as the CEO for Cisco’s next chapter, we have exactly the right leader to capture that opportunity. I could not be more confident in our future.

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24/7 Wall St. would conclude with the reminder that it is not unusual for the same analyst team to like multiple stocks in the same sector. Still, the winning of one big deal in communications equipment and services has for years now meant that another competitor lost out on the order.

Maybe Cisco and Juniper both have enough opportunities where they can both win. Stay tuned.