Last week, Google Inc (NASDAQ:GOOG) signed a deal that further props Chromebooks while investors failed to summon enthusiasm regarding Cisco Systems, Inc. (NASDAQ:CSCO) future prospects.
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Call it a “brick,” or “not a real laptop,” or whatever else you please. But the fact remains that Google’s Chromebook is going places. That’s (at least partly) because Google has recently signed an agreement with VMware (VMW) that greatly increases its functionality.
One of the major disadvantages of this cloud-based, ridiculously cheap device was its inability to run legacy software that is usually based onMicrosoft’s (MSFT) Windows platform. Now, using VMware’s Blast HTML5 technology, which is available as a Web-based app on Chromebooks, users can access all this stuff.
The plan is to make this service ultimately available to all as a Desktop-as-a-Service (DaaS) solution. Google believes it will enable companies to save $5,000 per computer (compared to traditional PCs).
This basically means that the device that no one thought would succeed beyond a very cost-conscious consumer has now become extremely useful for cost-conscious corporates. Suddenly, Microsoft’s “Scroogled” ads targeting the Chromebook make sense.
Investors Punish Cisco Shares
While Cisco managed to beat earnings and revenue expectations for their fiscal second quarter and also provided earnings guidance above our expectations, shares took a tumble following the announcement.
Cisco’s challenges do make a big pile – broad-based move toward cloud-computing that reduce demand for its hardware (routers, switches), a transition to mobile devices that again reduce demand for networking hardware, conservative enterprise spending given the continued market uncertainties, emerging market weakness stemming from distrust in government spying tactics and strengthening competition from Huawei in Asia and Juniper (JNPR) in the U.S.
But Cisco does appear to have met its own expectations thus far, so there is every chance it will remain on track to meet its own expectations of a recovery in the fiscal fourth quarter 2014/first quarter 2015 timeframe. The company expects to have its new products in the market by then.
Management is also very optimistic about the Internet of Things, which is expected to be the next big wave bringing Cisco back in the game. Considering the way it has tackled the market in the past, the long-term story should play out.
To pacify investors in the meantime, Cisco raised the quarterly dividend by a couple of cents.
Android Apps for Windows?
Some rumors do good things to share prices and some not so good. Last week, there was a rumor reported by The Verge that Microsoft, in a hurry to get its devices more popular with users, could allow Android apps to run on the Windows platform.
Companies seeking to build their own eco systems have to make solid hardware and give it time for adoption. Because usually, users are not attracted to hardware that does not come with their favorite apps. On the other hand, developers generally avoid platforms that do not have a lot of users. Microsoft could have given this some time if it wasn’t for the fact that it’s a very late entrant into a fiercely competitive market. Microsoft could definitely do with a spike in hardware sales (its tablet business is yet to make a profit).
While too much should not be read into rumors, there is also some conversation about an Android phone with the Nokia (NOK) brand, which is expected to launch at the Mobile World Congress. So maybe there is some truth to this.
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