Data Center Infrastructure

Cisco Boosted by Rosier Outlook

Cisco shares received a boost during after-hours trading on the Nasdaq on Wednesday after the vendor giant predicted that its long sales decline would come to an end in the next fiscal quarter.

Cisco Systems Inc. (Nasdaq: CSCO) now expects revenues to increase by 1% to 3% in the three months to the end of January 2018, compared with the year-earlier period. Its quarterly revenues have shown a year-on-year decline for the past two years.

Investors were clearly encouraged by the outlook, with Cisco's share price up more than 5% at the time of publication, to $35.91, before markets opened today.

First-quarter results showed a 2% year-on-year drop in revenues, to $12.1 billion, but net income rose 3%, to $2.4 billion.

Like other hardware players, Cisco has been hit by a downturn in the market for Internet equipment and is under threat from new technology trends. It has thrived by selling boxes that combine dedicated hardware and software capabilities. But so-called "white box" companies are disrupting this business by developing software that will run on commercial off-the-shelf (COTS) servers.

In response, Cisco has been trying to reinvent itself as a software and services company, largely through takeovers and partnerships, including a recent cloud tie-up with Google. While it still generates the bulk of its revenues from hardware sales, software and services continue to increase their share of the overall business.

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The company has started reporting sales around the five categories of infrastructure platforms, applications, security, services and "other."

Revenues from infrastructure platforms declined 4%, to $6.97 billion, despite growing interest in the recently announced "network intuitive" platform, an intent-based networking product designed to help customers run more automated networks. CEO Chuck Robbins said there are now 1,100 network intuitive customers, up from just 200 in the preceding quarter. (See Cisco Makes 'Intuitive' Bet to Reconquer Networks.)

Sales at the applications business rose 6%, to $1.2 billion, and those from security products were up 8%, to $585 million. There was a much smaller increase at the services business, with revenues up 1%, to $3.1 billion, while the "other" products category suffered a 16% decline, to $296 million.

Robbins said the update showed signs of good progress on strategy execution. "The network has never been more critical to business success," he said in a company statement. "Cisco is delivering more insights and intelligence as we help our customers build highly secure, intelligent platforms for digital business."

For more on Cisco's results, see this in-depth story on our sister site Enterprise Cloud News.

— Iain Morris, News Editor, Light Reading

Phil_Britt 11/24/2017 | 12:19:41 PM
Re: Cisco still struggling to find their place in the cloud But no one will want to be out of the market between now and the new year. Stocks that have appreciated will continue to do so.
lightreceding 11/24/2017 | 12:10:09 PM
Re: Cisco still struggling to find their place in the cloud Most of the appreciation in the stock market over the past few years has come from the Fed pumping out money that the banks use to speculate in the stock market. Cisco stock has been further supported by massive buy backs. The effects of the one time tax break for foreign earnings repatriation is likely already built in to the market. The small gains in revenue that Cisco has from software and subscriptions can't offset the huge losses from hardware. Cisco has missed the boat and now they are treading water.
Phil_Britt 11/24/2017 | 11:41:38 AM
Re: Cisco still struggling to find their place in the cloud Though it might be struggling to find its place in the cloud, it looks like it and most other tech stocks will benefit from a rising stock market and the possibility of tax changes by year end. People and institutions don't want to sell now in case they miss out on profits that could come with tax changes.
lightreceding 11/16/2017 | 1:04:11 PM
Cisco still struggling to find their place in the cloud After missing the transition to the cloud and wasting enough money on Scientific Atlanta, the year before AWS was launched, to buy every CSP in the country over the next few years, and focusing instead on selling Nexus switching to the CSPs, Cisco finally builds its own cloud years later only to kill it last year. Now they do a PR partnership with Google and hype it up to try to look relevant in the cloud and they start charging for Catalyst software on a subscription basis and call that a new business model that will lead the forward. I cry for Cisco.
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