Chambers Caught in 90s Deja Vu
Despite the expected revenue weakness in the fiscal second-quarter results announced today, Cisco CEO John Chambers says 2014 feels like the mid-1990s to him -- with a boom about to come. (See Revenue, Income Slide In Cisco's Q2 2014 and Cisco Set for Sales Slump.)
On today's earning call, the upbeat exec said that this year will be the inflection point for the "Internet of Everything," and that Cisco Systems Inc. (Nasdaq: CSCO) is well positioned to benefit from helping enterprises reshape themselves for that technology trend.
"This reminds me of the mid-1990s, just before the Internet and e-commerce moved from being a tech thing to something impacting all businesses," Chambers said. "There is a lag between thought leadership and early adoption, and we are still in the early phases of this."
Cisco has been touting the Internet of Everything -- a term encompassing mobility and machine-to-machine communications -- for six years but is only now finding interest in it growing. "Six years ago, we had to buy someone a drink to talk about it. Now they want to buy us dinner."
Pegging the market size at $19 trillion, Chambers said Cisco will capture, not only equipment sales, but also substantial consulting services revenues, as it moves to "outcome-based" approaches. He cited the vendor's efforts in Israel, where it is building a country-wide ultra-high-speed fiber optic network and working with the government on jobs, healthcare, education, and more.
Chambers also attributed the 12% slide in sales to service providers to a product cycle and timing issue. While older products such as cable video and set-top systems are approaching the end of their lifespan, the next generation of products -- Cisco's approaches to network and datacenter virtualization -- is emerging. (See Cisco Goes Soft With APIC, Intercloud Announcements and Cisco's ACI Gets Physical With SDN.)
Notably, cable video revenue declined 20%, contributing significantly to the overall SP slide.
Cisco also has come under some fire for an approach to software-defined networking that seems to emphasize an end-to-end, single-vendor architecture as the best approach, versus the best-of-breed interoperability that service providers say they are seeking with virtualization.
Ever the salesman, Chambers told financial analysts on the earnings call that Cisco's "architectural" approach to building the next generation of datacenters and networks will enable the Internet of Everything to take off. Past efforts have failed "because people try to do it one step at a time." Instead, Cisco will deliver a complex solution that encompasses mobility, datacenter, analytics at the edge, collaboration, security, and more.
The competition, he said, is still doing things piecemeal -- and he lumps both Cisco's traditional competitors and the startups tackling next-generation technologies into that category.
— Carol Wilson, Editor-at-Large, Light Reading