Cisco beats as network gear demand rises, new bets pay off

(Reuters) – Cisco Systems Inc beat analysts’ estimates for quarterly revenue and profit on Wednesday, as the network gear maker benefited from demand for its routers and switches and growth in its newer focus areas such as software.

FILE PHOTO: A logo of Cisco is seen during the Mobile World Congress in Barcelona, Spain February 27, 2018. REUTERS/Yves Herman/File Photo

Shares of the company, which also forecast second-quarter revenue largely above expectations, rose 4 percent in extended trading, putting them on track to add to the nearly 16 percent gain for the year.

Cisco pivoted to software and cyber security to cushion the impact from slowing demand for its routers and switches from companies increasingly shifting to cloud services offered by Amazon.com Inc, Microsoft Corp and Alphabet Inc instead of building their own networks.

Revenue in its application software businesses rose 18 percent to $1.42 billion, beating analysts’ average estimate of $1.37 billion, according to IBES data from Refinitiv.

Sales in its security business, which offers firewall protection and breach detection systems, rose 11 percent to $651 million. That fell short of IBES estimate of $656.4 million, but beat research firm FactSet’s estimate of $648.1 million.

Deals such as the $2.35 billion purchase of cyber security provider Duo Security in August have played an important part in driving growth in Cisco’s newer business.

Acquisitions provided an 80 basis point boost to the company’s first-quarter results year-over-year, Chief Financial Officer Kelly Kramer said on a post-earnings call with analysts.

Revenue in its infrastructure platform unit, which houses the switches and routers business, rose about 9 percent to $7.64 billion, topping expectation of $7.39 billion.

Subscriptions, which provide a more steady revenue flow, accounted for 57 percent of total software revenue in the first quarter, the company said. The share was 56 percent in the preceding quarter.

“Cisco is executing on its plan to move its business model to software and subscriptions while benefiting from a strong IT spending environment,” said Mark Cash, an analyst with Morningstar.

Cisco said tariffs were immaterial for the reported quarter, but added that the impending 25 percent duties could weigh on third-quarter results.

The company said it expects second-quarter revenue growth of between 5 percent and 7 percent from a year earlier. This implies a range of between $12.48 billion and $12.72 billion, while analysts were expecting $12.53 billion.

For its first quarter ended Oct. 27, the company reported an adjusted profit of 75 cents per share, above the average estimate of 72 cents.

Total revenue rose 7.7 percent to $13.07 billion, topping estimate of $12.87 billion. However, the company said deferred revenue fell 9.4 percent to $16.81 billion.

Reporting by Akanksha Rana in Bengaluru; Editing by Sriraj Kalluvila

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Amazon picks New York City, Washington D.C. area for new offices

SAN FRANCISCO/WASHINGTON (Reuters) – Amazon.com Inc (AMZN.O) picked America’s financial and political capitals for massive new offices on Tuesday, branching out from its home base in Seattle with plans to create more than 25,000 jobs in both New York City and an area just outside Washington, D.C.

The world’s largest online retailer plans to spend $5 billion on the two new developments in Long Island City and Arlington, Virginia, and expects to get more than $2 billion in tax credits and incentives with plans to apply for more.

The prize, which Amazon called HQ2, attracted hundreds of proposals from across North America in a year-long bidding war that garnered widespread publicity for the company. Amazon ended the frenzy by dividing the spoils between the two most powerful East Coast U.S. cities and offering a consolation prize of a 5,000-person center in Nashville, Tennessee, focused on technology and management for retail operations.

Losers said they learned from the process, while winners said it was costly but worthwhile.

“Either you are creating jobs or you are losing jobs,” New York Governor Andrew Cuomo told a news conference on Tuesday.

With more than 610,000 workers worldwide, Amazon is already one of the biggest employers in the United States and the world’s third-most valuable company, behind Apple Inc (AAPL.O) and Microsoft Corp (MSFT.O).

Still, it faces fierce competition for talent from Alphabet Inc’s (GOOGL.O) Google and other companies working to build new technologies in the cloud. Those rivals routinely offer free food and perks in sunny California, seen by many as a better draw than Amazon’s relative frugality in rain-plagued Seattle. Google also has a growing footprint in New York City.

Already marketing its forthcoming location in the New York City borough of Queens, Amazon talked up Long Island City’s breweries, waterfront parks and easy transit access. Rents there are typically lower than in Midtown Manhattan, which is just across the East River. The former industrial area also has a clock counting down the hours until the end of U.S. President Donald Trump’s first term in office.

The choice of Arlington, Virginia, just across the Potomac River from downtown Washington D.C., could hand Amazon greater political influence in the U.S. capital, where it has one of the largest lobbying shops in town. Locating close to the Pentagon may also help Amazon win a $10 billion cloud-computing contract from the U.S. Department of Defense, said Michael Pachter, an analyst at Wedbush Securities.

Jeff Bezos, Amazon’s chief executive and the world’s richest person, privately owns the Washington Post, which has written critical articles about Trump. In turn, Bezos’s companies have been a frequent target of broadsides from the president. The newspaper maintains full editorial independence from its owner.

Amazon’s choice largely bypassed the middle of the United States, where many cities had hoped for an economic boost and bid for the new jobs. The company already had large corporate workforces in greater Washington and New York.

“My heart is broken today,” Dallas Mayor Mike Rawlings said.

A couple walk past an office building at 1851 S. Bell St. in Crystal City where Amazon may place some of its workforce after announcing its new headquarters would be based in Arlington, Virginia, U.S., November 13, 2018. REUTERS/Kevin Lamarque

TAX BREAKS

At the outset of its search last year, Amazon said it was looking for a business-friendly environment. The company said it will receive performance-based incentives of $1.525 billion from the state of New York, including an average $48,000 for each job it creates.

It can also apply for other tax incentives, such as New York City’s Relocation and Employment Assistance Program that offers tax breaks potentially worth $900 million over 12 years. What benefit the company would actually get was unclear.

In Virginia, Amazon will receive performance-based incentives of $573 million, including an average $22,000 for each job it creates.

These rewards come on top of $1.6 billion in subsidies Amazon has received across the United States since 2000, according to a database from the Washington-based watchdog Good Jobs First.

Amazon says it has invested $160 billion in the country since 2010 and that the new offices will generate more than $14 billion in extra tax revenue for New York, Virginia and Tennessee over the next two decades.

It expects an average wage of more than $150,000 for employees in each new office.

Slideshow (8 Images)

HOUSING CRISIS

Amazon’s emphasis on new, high-paying jobs earned publicity as it faced criticism for low wages in its sprawling warehouses.

The company got $148 million worth of media attention across the English-language press in the two months following the launch of its search last September, according to media measurement and analytics firm mediaQuant Inc.

Amazon received 238 proposals and New York and Virginia beat out 18 other finalists from a January short list, which included Los Angeles and Chicago.

New Jersey made headlines early in the contest by proposing $7 billion in potential credits against state and city taxes if Amazon located in Newark and stuck to hiring commitments.

Others with less money to offer took a more creative approach: the mayor of the Atlanta suburb of Stonecrest, Jason Lary, said he would create a new city from industrial land called Amazon and name Bezos its mayor for life.

In evaluating its options, Amazon looked at the quality of schools, meeting with superintendents to discuss education in science and math. Amazon also wanted helicopter landing pads for the new sites, documents it released on Tuesday show.

The company has already had to navigate community issues at its more than 45,000-person urban campus in Seattle. An affordable housing crisis there prompted the city council to adopt a head tax on businesses in May, which Amazon helped overturn in a subsequent city council vote.

Some critics had pushed for more transparency from cities and states in the bidding process, warning that the benefits of hosting a massive Amazon office may not offset the taxpayer-funded incentives and other costs.

“Our subways are crumbling, our children lack school seats, and too many of our neighbors lack adequate health care,” New York State Senator Michael Gianaris and City Council Member Jimmy Van Bramer said in a joint statement. “It is unfathomable that we would sign a $3 billion check to Amazon in the face of these challenges.”

Amazon shares closed down 0.3 percent at $1631.17, giving the company a market value of almost $800 billion.

Reporting by Jeffrey Dastin in San Francisco and David Shepardson in Washington; Additional reporting by Arjun Panchadar and Supantha Mukherjee in Bengaluru, Angela Moon, Hilary Russ and Laila Kearney in New York, Suzannah Gonzales and Karen Pierog in Chicago; Writing by Nick Zieminski; Editing by Meredith Mazzilli and Bill Rigby

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?Red Hat blends Kubernetes into Red Hat OpenStack Platform 14

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There was a bit of fear when IBM acquired Red Hat that Red Hat might abandon the OpenStack Infrastructure-as-a-Service (IaaS) cloud. Nah!

In Berlin at OpenStack Summit, Red Hat introduced its latest OpenStack distribution: Red Hat OpenStack Platform 14. It comes with a generous helping of Kubernetes container orchestration via Red Hat OpenShift Container Platform.

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Red Hat’s new OpenStack is built on top of the OpenStack “Rocky” community release. This version is noted for its significant bare-metal improvements in Ironic, its bare metal provisioning module, as well as in Nova, its compute instances provisioning program. Red Hat makes use of both improvements by automated provisioning of bare metal and virtual infrastructure resources in its OpenShift Container Platform.

To manage those containers, no matter if they’re on bare metal or in a Virtual Machine (VM), the new OpenStack Platform 14 is more tightly integrated than ever with Red Hat OpenShift Container Platform, Together, OpenStack Platform 14 aims to deliver a single infrastructure offering for traditional, virtualized, and cloud-native workloads.

This combination also provides new capabilities:

  • Automated deployment of production-ready, high-availability Red Hat OpenShift Container Platform clusters, helping to provide a path toward continuous operations without a single point of failure.
  • Integrated networking enabling OpenShift container-based and OpenStack virtual workloads from the same tenant to be connected to the same virtual network (Kuryr) increasing network performance.
  • Automated use of built-in OpenStack load balancer services to front-end container based workloads.
  • Use of built-in OpenStack object storage to more efficiently host container registries.
  • Director-based scale-out and scale-in Red Hat OpenShift nodes, enabling businesses to expand or retract resources as workload requirements change.

Red Hat OpenStack Platform 14 also extends its integration with Red Hat Ansible Automation, Red Hat’s DevOps tool. This makes deploying OpenStack — always tricky — much easier than in previous versions.

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The latest version also includes:

  • Processor scalability for emerging and extreme workloads like artificial intelligence (AI) and graphics rendering through a Technology Preview of NVIDIA GRID Virtual PC (vPC) capabilities. This enables the sharing of NVIDIA graphics processing units (GPUs) across virtual machines and applications, making it easier to scale resources to meet the demands of intensive applications.
  • Improved storage availability, management, data migration, and security through enhanced integration with Red Hat Ceph Storage including the ability to share the same Cinder storage volume across multiple VMs.
  • Inclusion of Skydive, a innovative, layer-independent network analysis tool that simplifies the validation, documentation, and troubleshooting of complex virtual network topologies as a Technology Preview.

Finally, Red Hat continues to support not only x86 processors, but IBM Power architecture as well. Yes, this means you could set up an OpenStack cloud, which could run across both Commercial off-the-shelf x86 servers and mainframes.

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In a statement Joe Fernandes, Red Hat’s Cloud Platforms vice president concluded:

“As the de facto standard in Linux container orchestration, Kubernetes adoption is often a key part of the technology mix for enterprise digital transformation, but this can require a scalable, flexible foundation for organizations to realize its full potential. By more tightly integrating the industry’s most comprehensive enterprise Kubernetes platform in OpenShift with the latest version of Red Hat OpenStack Platform, we’re providing a robust, more reliable foundation for cloud-native workloads.”

Red Hat OpenStack Platform 14 will be available in the coming weeks via the Red Hat Customer Portal and as a component of both Red Hat Cloud Infrastructure and Red Hat Cloud Suite.

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