This week's Citi Global Technology Conference in New York City featured many big-name tech firms, and a lot of them had interesting things to say.
Here's a look at notable remarks made at the conference by execs at four of those firms: Nvidia (NVDA) CFO Colette Kress, Microsoft (MSFT) Worldwide Commercial EVP Judson Althoff, Cisco Systems (CSCO) Security SVP Jeff Reed and Qualcomm (QCOM) CFO George Davis.
1. Nvidia Might Step Up Its Capital Returns
Though Nvidia's free cash flow (FCF) is expected on average by analysts to grow 54% in fiscal 2019 (it ends in January) to $4.5 billion, it's said that it plans to keep the amount it spends on capital returns (dividends and stock buybacks) even with a fiscal 2018 level of $1.25 billion, and up just 25% from fiscal 2017's $1 billion. As a result, the percentage of Nvidia's FCF that's set to be returned to shareholders in fiscal 2019 will be markedly less than the percentage returned in recent years.
When asked about this at the Citi conference, Kress noted Nvidia has returned over 75% of its FCF since it restarted its capital return program in 2013, and suggested it could up its spending on the program in time. "We feel very good about that [75%-plus] return and we will continue to look in terms of that cash to say, 'How do we increase that?'" She qualified her remarks, however, by saying that such a payout is "not something that you can keep up with every single day."
2. Microsoft Is Upbeat About Growing Sales of the Most Expensive Version of Office 365
Microsoft has recently noted that its commercial Office revenue, which was up 10% annually in the June quarter, is benefiting not just from Office 365 subscription growth, but also from a mix shift towards costlier Office 365 plans. During his Citi talk, Althoff, who oversees Microsoft's commercial business strategy, sounded optimistic about his firm's ability to grow the percentage of Office 365 sales that involve the Enterprise E5 version of the productivity suite, which costs $35 per user per month prior to discounts.
Unlike cheaper versions of Office 365, E5, which is said for now to account for a "relatively small" share of subscriptions, comes with Microsoft's popular Power BI Pro analytics/data visualization product, as well as e-mail and cloud app security tools. And like some cheaper versions of the suite, E5 comes with Microsoft Teams (a Slack alternative), the Skype for Business communications platform and Yammer enterprise social networking service.
"The number one driver [behind E5 adoption] is security, followed very closely behind by analytics and Power BI," Althoff said. Regarding Power BI, Althoff claimed it's replacing rival Tableau Software's (DATA) offerings "left and right." Tableau CFO Damon Fletcher, it should be noted, offered a different view of his firm's competitive position in a recent interview with TheStreet.
3. Cisco Feels Its Ability to Tie Security Sales to Networking and Software Deals Is Helping It Gain Ground
When asked about his company's security sales strategy, Cisco's Reed noted that in addition to selling security products on a standalone business, his company will often attach them to enterprise networking deals.
He added that security products such as Stealthwatch (it monitors network traffic for threats), Encrypted Traffic Analytics (it spots malware) and Identity Services Engine (it controls network access) integrate with Cisco's networking products in various ways, and can be purchased through its Cisco ONE software packages.
Reed also mentioned that adoption of Cisco's comprehensive Enterprise Agreements for software licensing (they became available last year) are boosting uptake for security products, and that security is a popular use case for its Tetration data center analytics platform.
In the July quarter, Cisco's security product revenue rose 12% annually to $627 million. The company recently inked a $2.35 billion deal to buy Duo Security, which provides a zero-trust solution for verifying user identities and controlling access to applications.
4. At Least One Big Smartphone Maker (Apple?) Plans to Wait Until 2020 to Launch a 5G Phone
"[W]e have a very large OEM who doesn't have a 2019 phone launch in 5G," said Qualcomm's Davis when asked about how his firm sees 5G phone sales ramping. Though the OEM wasn't named, Apple (AAPL) , which took its time to launch a 4G iPhone, cares a lot about battery life and according to at least one report doesn't plan to launch a 5G iPhone next year, is a plausible name.
Nonetheless, Davis forecasts a strong 5G phone ramp over the next three years. "2021 will look like a 5G market," he said. "2020 will look like a much stronger 5G market than 2019. And 2019 is when everybody establishes their first device in the marketplace." Or almost everybody, at least.
Qualcomm has taken an early lead in the 5G phone modem market thanks to its Snapdragon X50 modem, which has seen healthy design win activity among smartphone makers. Lenovo appears set to launch a Qualcomm-powered 5G phone, and some reports indicate Samsung (SSNLF) will offer a 5G version of the Galaxy S10. In the near-term at least, network availability is likely to keep a lid on the pace of 5G phone adoption.
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