Cisco Returns to Growth, With Help From Network Automation

Cisco's new intent-based networking strategy helps the company break a two-year revenue decline.

Mitch Wagner, Executive Editor, Light Reading

February 14, 2018

4 Min Read
Cisco Returns to Growth, With Help From Network Automation

Cisco CEO Chuck Robbins credits the company's new intent-based networking strategy as a significant driver for its long-awaited return to revenue growth.

Cisco Systems Inc. (Nasdaq: CSCO) broke a two-year run of quarterly declining revenues in earnings reported Wednesday. Cisco reported second quarter revenue of $11.9 billion, up 3% year-over-year. (See Cisco's Q1 Beats Wall Street Expectations.)

Cisco is making a transition from product sales -- switches and routers and other networking equipment -- to software and recurring revenue, including cloud. That seems to be going well; recurring revenue comprised 33% of total revenue, up two points year-over-year. (See Cisco: Enterprises Will 'Spend Differently'.)

Nonetheless, the company recorded a loss of $8.8 billion or $1.78 per share, including a $1.1 billion charge related to the Tax Cuts and Jobs Act. Non-GAAP net income was $3.1 billion or $0.63 per share.

For the third quarter of fiscal 2018, Cisco expects to see 3% to 5% revenue growth year-over-year, with GAAP earnings per share of $0.50 to $0.55 and non-GAAP EPS of $0.64 to$0.66.

In intent-based networking, Cisco's automation strategy announced in June, Cisco more than doubled its customer base for the Catalyst 9000 switching platform in sequential quarter, to over 3,100, the company said. (See Cisco's 'Network Intuitive': A Risky Transition.)

Figure 1: Photo by Diesmer Ponstein (Cisco Amsterdam - Flickr) [CC BY 2.0], via Wikimedia Commons Photo by Diesmer Ponstein (Cisco Amsterdam - Flickr) [CC BY 2.0], via Wikimedia Commons

Keep up with the latest enterprise cloud news and insights. Sign up for the weekly Enterprise Cloud News newsletter.

"We're incredibly pleased with the early acceptance of the intent-based portfolio," Robbins said on an earnings call with analysts Wednesday. "The Catalyst 9000 is the fastest ramping product in our history."

Cisco plans to extend intent-based networking across the rest of its portfolio, beyond campus switching to routing, Viptela SD-WAN, Application Centric Infrastructure in the data center, and security. Cisco has as total of more than 800,000 customers. "So we obviously have room to run," Robbins said.

The commercial market -- small and medium-sized businesses, with employee counts under about 1,000 -- have been early adopters of intent-based networking. Bigger enterprises, with longer buying and evaluation cycles, are still evaluating, Robbins said.

Total product revenue was up 3%, with the infrastructure platform returning to growth, up 2%, with strong growth in switching, wireless, data center servers and Hyperflex storage. (See Cisco Turns Up the Heat on Hyperconvergence.)

That growth was offset by a "modest" decline in routing products, driven by continued weakness in the service provider sector, Kelly Kramer, executive vice president and chief financial officer, said on a call with analysts Wednesday.

Applications were up 6%, including collaboration, unified communications, conferencing and telepresence, as well as the Jasper Internet of Things and AppDynamics application optimization platforms.

Security was up 6%, with strong performance unified threat and web security.

By sector: Enterprise sales were up 3%; sales to small- and medium-sized businesses under about 1,000 employees, which Cisco calls "commercial," were up 14%; public sector was up 8%; and service provider revenue was down 5%.

Cisco increased its quarterly dividend 4 cents, up 14%, representing a yield of 3.1%, and increased its share repurchase program $25 billion to $31 billion.

Related posts:

— Mitch Wagner Follow me on Twitter Visit my LinkedIn profile Visit my blog Follow me on Facebook Editor, Enterprise Cloud News

About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like