Cisco's Strong Quarter Bolstered by Data Center, Mobility Units

Cisco CEO John Chambers said the company's strong architectural play will serve it well in such areas as SDN and the cloud.

Cisco Systems’ aggressive efforts to become an enterprise IT solutions provider are paying dividends, with strong growth in its data center offerings and mobility solutions, according to CEO John Chambers.

In a conference call with analysts and journalists May 15 following the release of the company’s latest quarterly financial numbers, Chambers said his company is well-positioned to take advantage of the trends that are driving significant changes in the data center, from cloud computing and virtualization to mobility and bring your own device (BYOD).

In addition, Chambers said he believes Cisco is well-positioned in the highly competitive software-defined networking (SDN) space.

“Customers are telling us that they strongly prefer the breadth and openness of Cisco’s approach and ability to build upon existing network investments and run across hybrid environment as only Cisco can deliver. We feel very confident in our leadership position in this market,” he said. “I don’t think it’s going to be a software game, it’s going to be an architectural game,” where Cisco can leverage its strengths in networking hardware, software and silicon.

Data center technologies and wireless products were key drivers in a strong fiscal third quarter. Overall revenue jumped 5.4 percent over the same period last year, to $12.2 billion, with net income climbing to $2.5 billion. It was the ninth consecutive quarter of record revenues, Chambers said.

Cisco, like other rivals such as Hewlett-Packard and Dell, is pushing to become an IT solutions and services provider, building upon its networking routes. The company has been aggressive in buying companies to build up its capabilities in such areas as cloud, mobility, collaboration and security, and the numbers from the quarter show that the efforts are continuing to bear fruit, he said.

“Our leadership in the data center, wired and wireless networking and our architectural approach is enabling us to be the trusted partner for many customers as they optimize our business for a world of many clouds,” Chambers said. “I think what you are beginning to see … is a transition for us moving from a communications company—selling boxes five or 10 years ago—to being a solutions company selling IT to our customers.”

Cassandra Mooshian, an analyst with Technology Business Research, expects Cisco to continue its buying spree. In a research note May 15, Mooshian noted the recent acquisitions of companies like Ubiquisys, Cognitive Security and Intucell.

“Cisco will continue to acquire companies in 2013 that provide complementary offerings to its portfolio, particularly around cloud and mobility,” she wrote.

According to Cisco, revenues for the data center business climbed 77 percent, due in large part to the combination of the company’s Unified Computing System (UCS)—a converged data center offering that includes Cisco servers and networking, EMC and NetApp storage and VMware virtualization technology—and the Nexus networking switch business. Combined, the two businesses have an annual run rate of $5.5 billion.

“The UCS is becoming a preferred and strategic platform across all segments and geographies around the world,” he said.

Revenues in Cisco’s cloud computing business also were up 77 percent, while the wireless business saw sales grow 27 percent.

“We see demand for faster speed ports driving switching upgrade cycles and, in Q3, shipped a record number of 10 [Gigabit Ethernet] ports, growing 35 percent year-over-year,” Chambers said. “We do see budget shifting from wireline to wireless, benefiting our wireless business, which delivered another strong quarter.”

Cisco also is embracing the growing SDN trend, he said. SDNs offer the promise of greater flexibility, scalability and programmability in networking architecture by taking network intelligence from the physical switches and routers and putting it into software. Cisco’s answer to SDN is its Cisco ONE (Open Networking Environment), which looks to leverage Cisco’s broad offerings for greater compatibility with existing networks.

“During the quarter, we provide additional detail and our strategy to deliver a new model for IT helping our customers move beyond the hype of software-defined networks … to a much more complete solution for networks programmability and orchestration,” Chambers said.

Cisco already has more than 50 beta testers for its Cisco ONE controller and platform, he said, adding that Cisco also is a leading member of the new OpenDaylight Project, which aims to create a common, open SDN platform.