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Data Sheet—Thursday, February 12, 2015

Feb 12, 2015

Good morning, Data Sheet readers. Cisco surprised analysts with a strong second quarter. Plus, at $700 billion, is Apple stock too cheap? This influential activist investor thinks so.

Forward this newsletter to technophiles, and tell them to sign up! Did you miss one? Here's an archive of past editions.

TRENDING

Despite its $700 billion milestone, Carl Icahn still thinks Apple’s stock is undervalued. His target (disclosed in a letter to Twitter followers) is $216 per share, far more than the $124.92 record it set on Tuesday.

Security schmooze-fest. President Obama wants businesses to talk to each other about how they are fighting cyberthreats. Attendees at a White House summit scheduled for Friday include the usual suspects: Apple, Facebook, Intel, Google, Bank of America, Kaiser Permanente, Visa, MasterCard, American Express, and PayPal. Many high-profile corporate victims won’t be speakers, like Home Depot, Target, JPMorgan, Anthem or Sony. You weren’t invited? Catch the live stream.

Google goes for the gusts. It just signed another wind energy contract (I’ve lost count). This time, it’s buying enough power to light up the entire Googleplex.

By the way, an IBM spokeswoman checked in with me last night to challenge my characterization of IBM's renewable energy investments in my piece yesterday about Apple's big solar contract.

She notes that renewables account for 17% of global energy purchases—although it's tough to figure out whether that is from renewable energy certificate purchases or direct procurement. I actually knew that, my point is that IBM isn't all in, doesn't talk much about renewable energy other than the requisite reports, and it really should. Perhaps I should have used "quiet" instead of "mum."

Samsung’s antidote to weaker mobile profits involves investing $3.6 billion in next-generation organic LED display technology—which it will sell to other smartphone manufacturers. Its new production capacity will be in place by 2017.

Freedom from Internet taxes, forever. The Senate floats this idea annually, but this time it has bipartisan support. And it also isn’t tied to more controversial legislation that proposes charging online retailers sales tax.

Log this. Although it’s still losing money ($38.5 million for the fourth quarter), customer support software company Zendesk calls for 40%-50% growth this year.

Plus, two oops alerts. Data storage equipment company NetApp just missed 3Q revenue and income estimates, and slashed its guidance for its fourth quarter. Meanwhile, FireEye just lost way more than analysts expected for its fourth quarter. One bright spot: it signed more than 1,000 customers over the period (a way faster rate that previous quarters), and the security company was just hired by health insurer Anthem for data breach cleanup.

CISCO SAVES FACE WITH LATEST QUARTER

Cisco CEO John Chambers has guided the networking giant through plenty of technology adoption cycles during his impressive 20-year tenure. He’s looking for at least one more, and the company’s second-quarter financial results offer glimpses of hope.

After barely squeezing out 1.3% revenue growth in the first quarter, Cisco reported a 7% bump for its latest reporting period to reach $11.9 billion. GAAP net income leapt 68% to $2.4 billion.

The results topped revenue analysts’ expectations (the consensus was for $11.8 billion) and also the average adjusted earnings estimate (51 cents per share).

“Our strong momentum is the direct result of how well we have managed our company transformation over the last three plus years and our leadership position in the key technology transitions of cloud, mobility, big data security, collaboration and the Internet of everything,” Chambers said, commenting on the results. “Every nation, every company, everything is becoming digitized, and the network is at the center of this transformation.”

During his conference call Wednesday night with analysts, he added: “Cisco, has never, ever been better positioned.”

If you peek at Cisco’s presentation, it’s especially notable that much of the second-quarter upside was fueled by a major overhaul across Cisco’s flagship network switching technology. The update reflects the pressure it is feeling from lower-cost competitors selling software-defined networking (SDN) alternatives. (As a backdrop, it's good to remember that Cisco is embroiled in a bitter, relatively rare intellectual property suit with one of its fiercest rivals in this space, Arista Networks.)

In any event, Cisco's second-quarter switching sales grew by 11% to $3.6 billion and accounted for about one-third of overall revenue. Obviously, its switch-up resonates with Cisco's business customers.

Of course, there are plenty of things for Chambers to worry about as he looks ahead.

In particular, the company needs to revive sales to telecommunications companies and service providers. In its latest mobile data trends forecast, Cisco recognizes that video traffic is the strongest driver of increasing bandwidth demands. Yet, its sales to video service providers were off 19% for the second quarter.

An equally large concern looking forward is the trend by massive Internet businesses, notably Facebook, to move away from proprietary data center technology in favor of SDN and other open source software options. The mantra: lower expenses, more control, through networking features that can be programmed into commodity server hardware. Or as Facebook engineering vice president Jay Parikh put it this week to the New York Times. “There are efficiencies in terms of people and money, and total cost of ownership models. Most of our big bets are based around huge changes in flexibility though.”

SCUTTLEBUTT

Google’s mobile payments strategy may or may not include point-of-sale technology, according to tech news site The Information (registration required, but here’s a Gigaom pick-up of the story).

New antitrust scrutiny for Qualcomm. Just days after Qualcomm’s $1 billion(ish) settlement with China, South Korea is considering its own investigation.

LET'S MAKE A DEAL

Mark the date. Microsoft has, indeed, acquired software developer Sunrise, which develops mobile calendar apps for very non-Windows mobile gadgets. The terms weren’t disclosed, but TechCrunch last week reported the valuation was near $100 million. Rumor du jour: it may have bought digital pen company N-trig.

$2.2 billion merger will create massive European data center provider. Together, Telecity Group and Interxion Holding will control more than 50 facilities. The not-so-surprising impetus: the corporate migration to cloud computing services. If the deal goes through, the two will become one later this year.

GAZE INTO THE CRYSTAL BALL

1 billion and counting. That’s the total number of data records compromised during 2014, which represents a 78% increase over the previous year, figures digital security firm Gemalto.

This doesn’t bode well for Apple Watch, or does it? Research firm Canalys estimates there were only 720,000 Android-powered smartwatches sold during the last six months of 2014. Then again, maybe they’re waiting until April, when Apple’s version is due to ship.

UP-AND-COMERS

$60 million fund for early-stage enterprise software companies. Zetta Venture Partners plans investments of $500,000 to $2 million, with a bias toward analytics startups—and money left for follow-on rounds. Its portfolio already includes Content Analytics, Domo, EventBoard, FollowAnalytics, InsideSales, Lucid Design Group, Optimine, and Pixlee.

PEOPLE ON THE MOVE

Looks like Dropbox is getting more serious about IPO preparation. The cloud file-sharing startup just replaced and insider with new CFO Vanessa Whitman, who held the same position for Google’s Motorola division. (Her former boss works for her new employer.)

Atlassian spruces up financial credentials. New CFO Erik Bardman’s resume includes the same title at electronics company Roku, computer accessories maker Logitech International, and eBay Marketplaces. The hire will help the software company “operate the business as public-market ready,” in the words of co-founder and co-CEO Mike Cannon-Brookes.

Former Microsoft executive Lindsay Sparks (he’s been gone for eight years but ran education and SMB strategy, among other things) was just named CEO of newly independent Sysomos. The company sells social marketing analytics services to the likes of Boeing, BlueCross BlueShield, Coca-Cola, and Genentech.

ONE MORE THING

Waste not, want not. ecoATM (owned by the same company behind Redbox videos and Coinstar money collection terminals) is a kiosk maker that teams with huge shopping malls, and the likes of Walmart, Kroger and Safeway to recycle and pay consumers for unwanted mobile gadgets. It just reached a 4 million item milestone, barely five months after hitting 3 million.

MARK YOUR CALENDAR

Strata+Hadoop World. Make data work. (Feb. 17 – 20; San Jose, California)

IBM Interconnect: Cloud and mobile strategy. (Feb. 22 – 26; Las Vegas)

Gartner CIO Leadership Forum: Digital business strategy. (March 1 – 3; Phoenix)

Microsoft Convergence: Dynamics solutions. (March 16 – 19; Atlanta)

IDC Directions 2015: Innovation in the 3rd Platform era. (March 18; Boston)

Cisco Leadership Council: CIO-CEO thought leadership. (March 18 - 20; Kiawah Island, South Carolina)

Technomy Bio: The big picture on transformation. (March 25; Mountain View, California)

Gartner Business Intelligence & Analytics Summit: Crossing the divide. (March 30 – April 1; Las Vegas)

Knowledge15: Automate IT services. (April 19 – 24; Las Vegas)

RSA Conference: The world talks security. (April 20 – 24; San Francisco)

Forrester’s Forum for Technology Leaders: Win in the age of the customer. (April 27 - 28; Orlando, Fla.)

MicrosoftIgnite: Business tech extravaganza. (May 4 – 8; Chicago)

NetSuite SuiteWorld: Cloud ERP strategy. (May 4 – 7; San Jose, California)

EMC World: Data strategy. (May 4 - 7; Las Vegas)

SAPPHIRE NOW: The SAP universe. (May 5 – 7; Orlando, Florida)

Gartner Digital Marketing Conference: Reach your destination faster. (May 5 – 7; San Diego)

Annual Global Technology, Media and Telecom Conference: JP Morgan’s 43rd invite-only event. (May 18 - 20; Boston)

HP Discover: Trends and technologies. (June 2 - 4; Las Vegas)

Brainstorm Tech: Fortune’s invite-only gathering of thinkers, influencers and entrepreneurs. (July 13 - 15; Aspen, Colorado)

VMworld: The virtualization ecosystem. (Aug. 30 – Sept. 3, 2015; San Francisco)

Dreamforce: The Salesforce community. (Sept. 15 - 18; San Francisco)

Gartner Symposium ITxpo: CIOs and senior IT executives. (Oct. 4 - 8; Orlando, Florida)

Oracle OpenWorld: Customer and partner conference. (Oct. 25 - 29; San Francisco)

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