By Elizabeth Hedstrom Henlin, Analyst
Workday will build on its tandem investment strategy supporting both product and go-to-market teams to sustain install base expansion rates
Double-digit revenue growth (76% year-to-year total revenue growth; 82% year-to-year subscription revenue growth) underscores Workday’s success monetizing its portfolio expansion and growing its install base. Relatively flat operating losses in the same year-to-year period emphasize the degree with which Workday continues to invest in its personnel (with two-thirds of current expenses personnel affiliated). Double-digit increases in sales and marketing (nearly 66%) as well as research and development (nearly 76%) show Workday is ready to extend its portfolio outside of core HCM strengths and expand the teams on the ground selling that broadened portfolio. Workday noted that the company has met hiring plans for FY14 as of this quarter and is extending hiring through the balance of this year.
By Scott Dennehy, Engagement Manager/Senior Analyst
Cisco’s revenue growth slowed in 3Q13 due to weak customer spending and major product transitions in key markets
Cisco’s 3Q13 (fiscal 1Q14) financial results show the company is not immune to the impact of conservative customer spending in emerging markets and the U.S. public sector felt by many of its competitors over the last several quarters. Cisco’s 1.8% year-to-year revenue growth was below the company’s 2Q13 guidance of 3% to 5% growth, with the weak demand exacerbated by product transitions in several of its major segments, such as Switching and NGN Routing, where the introduction of new high-end platforms like the CRS-X, NCS and Nexus 9000 caused customers to delay their purchases of Cisco products.
By Jane Wright, Engagement Manager/Senior Analyst
NetApp’s 3Q13 financial performance reflects a vendor that is poised to overcome near-term macroeconomic uncertainties and continued hardware commoditization and to achieve long-term revenue and profit growth. In 3Q13 sales of stand-alone software and services offset double-digit hardware revenue declines to drive up gross margin 300 basis points to 62.3% on the back of 0.6% year-to-year corporate top-line growth. This performance was supported by branded revenue, which NetApp reported grew 5% year-to-year and 4% sequentially to account for more than 90% of total revenue.
By Cassandra Mooshian, Analyst
A challenging third quarter in product orders and negative impact as a result of the U.S. government shutdown leads to a negative outlook for the coming quarter
Cisco Systems reported quarterly revenue of $12.1 billion, up 1.8% from the year-ago quarter in calendar 3Q13, Cisco’s fiscal 1Q14. Cisco Services’ revenue increased 4.2% over the same compare to $2.7 billion, with growth ahead of product revenue growth of 1.1% as a result of the company’s transition to a more solutions-led approach. With its third quarter ending on Oct. 26, 2013, Cisco’s 3Q13 reflects a $50 million impact as a result of the U.S. government shutdown in October. TBR believes many of its peers did not report similar impacts in their third quarter earnings as their fiscal quarters ended prior to the shutdown, many in late September. The company indicated it expects to take an 8% to 10% negative year-to-year impact on revenue in the coming quarter as a result of slower-than-anticipated product orders in 3Q13 and significant slowdowns in emerging markets (Cisco’s top five emerging markets experienced corporate revenue declines in 3Q13 of between 18% and 35%). Product order slowdown will affect services revenue as well, reducing the number of product-related advisory, implementation and support services opportunities for the company.
By Matthew Casey, Analyst
IBM continues to run its tried-and-true acquisition play to advance key strategic initiatives
Much like the Packers’ Power Sweep, Vince Lombardi’s go-to play that delivered repeatable results, IBM’s acquisition strategy entails a similar highly successful, repetitive methodology to delivering outcomes. Mirroring the infamous running play, IBM’s acquisition strategy incorporates a simplistic, repeatable approach of identifying niche vendors that fill specific capability gaps and integrating them with solutions to advance key corporate initiatives. The success of this play has been demonstrated by acquisitions in the past, including Q1 Labs, Worklight and Kenexa, which helped formalize and scale IBM’s Security, MobileFirst and Smarter Workforce portfolios.
By Jillian Mirandi, Analyst
Rackspace’s hybrid cloud story will drive long-term adoption and install base growth around a maturing, open technology portfolio backed by its Fanatical Support team
Following the launch of its OpenStack-based public cloud services in 2H12, Rackspace has focused CY13 messaging and product investments on delivering enterprise-grade hybrid cloud capabilities across its public cloud and dedicated cloud (i.e., managed hosting and private cloud) businesses. Public cloud will remain a priority investment area for Rackspace as a piece of the hybrid cloud value proposition and is expected to continue driving corporate revenues into CY14. For 3Q13, Rackspace’s public cloud revenues increased nearly 37% year-to-year to $108 million, compared to growth of 9% year-to-year to $280 million for its dedicated cloud portfolio. However, by being early to market in hybrid cloud messaging and providing the necessary technological, support and reference accounts to enterprise customers, TBR believes Rackspace’s hybrid cloud story will successfully drive long-term growth for both its public cloud and dedicated cloud businesses. TBR’s upcoming 2013 Hybrid Cloud Adoption Study shows hybrid cloud emerging as the most popular infrastructure platform model in 2014, providing credence to Rackspace’s hybrid cloud value proposition.
By Matthew Bowden, Research Analyst
Lenovo grew revenue and margins to record levels on strong demand for its PCs, smartphones and tablets worldwide
Lenovo grew corporate revenue a reported 12.7% year-to-year, climbing to $9.8 billion in 3Q13, as it continued to capture market share in the contracting PC market. While the company is experiencing success with its smartphone and tablet segments in emerging markets such as those in APAC and EMEA, it also continues to grow PC revenue, which accounted for 78.8% of corporate revenue. Notebook PC revenue grew 8% year-to-year as the company leverages its Think brand’s product design and reliability to drive sales of its Windows 8 touch-screen convertibles. Desktop PC shipments grew 1% year-to-year; however, revenue declined 3% over the same period as Lenovo utilized aggressive pricing to protect market share.