Cisco Has Strong Quarter Despite Drops in Switch, Data Center Spending

By Jeffrey Burt  |  Posted 2016-02-10 Print this article Print
Cisco CEO

The overall data center business declined 3 percent, also impacted by a slowdown in customer spending, according to Kelly Kramer, executive vice president and CFO. In addition, in the same period the previous year, the business saw a 40 percent increase, which made for a difficult comparison.

Other businesses saw growth, including collaboration, which increased 3 percent, helped by 17 percent growth in WebEx. Video grew 37 percent, while the security business rose 11 percent.

Robbins also said the company continues to grow its cloud- and software-based offerings, including WebEx, security and Meraki cloud networking. Deferred revenue grew to $15.2 billion, an increase of 8 percent. Deferred product revenue increased 11 percent, while deferred service revenue grew 7 percent.

"You are seeing us move more of our portfolio to be delivered in both on-premise and cloud-based models, and we are aggressively driving this transition," he said.

Cisco will continue cloud-enabling its portfolio to meet customer demand for software-as-a-service (SaaS) and subscription offerings, according to Patrick Filkins, a research analyst with Technology Business Research.

"Faced with mounting pressure from competitors and customers alike, Cisco is taking steps to evolve and reduce its reliance on network infrastructure sales," Filkins wrote in a research note, pointing to the growing number of products the company is making available through the cloud. "Cisco has not ruled out employing a similar strategy with its network infrastructure. As the software in routers and switches is increasingly emphasized due to hardware commoditization and the threat of white-box hardware, Cisco is likely to offer its networking software via subscription in the next several years."

Cisco expects revenue during the current quarter to grow 1 percent to 4 percent.


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