Friday was a good day for the Dow Jones Industrial Average (DJINDICES:^DJI), with the index gaining 0.99% by 2 p.m. EDT. A strong jobs report may be behind the gains, although markets have been volatile as the U.S.-China trade war rages on.
Dow component Cisco Systems (NASDAQ:CSCO) failed to participate in the rally, slumping after a rival warned about weak spending from a major cloud customer. Disney (NYSE:DIS) didn't miss out, though, jumping higher even as competitors fleshed out their rival streaming offerings.
Cisco suffers after rival drops bombshell
Shares of networking hardware market-leader Cisco were down 1.6% after much smaller rival Arista Networks (NYSE:ANET) shocked investors with abysmal guidance. Arista warned that spending from a single large cloud customer had suddenly weakened, leading the company to predict a revenue decline in the fourth quarter. Arista stock fell around 24% on the news.
While Arista's struggles could prove to be a canary in the coal mine for the networking industry, they also may simply be a company-specific issue. Arista depends on a small number of cloud customers for a significant portion of its revenue. Microsoft, for example, accounted for 27% of revenue in 2018, although the company expects a lower contribution this year.
Arista expects to produce fourth-quarter revenue of just $540 million to $560 million, down from $595.7 million in the fourth quarter of 2018. The company had previously experienced a slowdown in spending from a large cloud customer in the second quarter, but now a second large cloud customer is "reducing their forecast dramatically from original projections for both Q4 2019 and for calendar 2020," said CEO Jayshree Ullal during the earnings call.
Cisco's customer base is comprised of large companies and organizations, as well, but it's not heavily exposed to a single customer. No single customer accounted for more than 10% of revenue in fiscal 2019.
While Cisco is sensitive to global economic conditions, it's not sensitive to the decisions of a single customer. This Arista-driven decline seems like an overreaction.
Disney powers higher as streaming rivals plot course
Disney stock was up 1.8%, buoyed by broad stock market gains. The media giant is set to launch its highly anticipated Disney+ streaming service on Nov. 12, adding to an increasingly competitive landscape. In the past few days, more details emerged about some of the streaming services Disney will eventually be competing against.
AT&T, which owns HBO and Time Warner, officially unveiled its upcoming HBO Max service earlier this week. It will include all of HBO, as well as additional original content and a selection of other programming owned by the company. The service will launch in May 2020 for $14.99, the same price as AT&T's existing HBO Now streaming service.
On Friday, CNBC reported that Comcast's NBC was considering a free ad-supported version of its upcoming Peacock streaming service. Previously, Comcast was considering making the service free only for cable and internet subscribers, according to CNBC's sources.
Disney's $6.99 monthly service will undercut many of its competitors, including HBO Max and Netflix. Disney also has a large catalog of quality content, including classic Disney movies, Pixar, Marvel, Star Wars, and a slate of original programming. With the stock powering higher, Disney investors don't seem too worried about the competition.