Cisco looks to goose enterprise business amid pandemic

While Cisco's business with network operators doesn't appear to be impacted – yet – by the spread of COVID-19, the company's sales to enterprises are another matter entirely.

"Our basic premise about COVID-19's impact on the sector is it's positive for Service Provider, Cloud Service Provider and Public Sector demand, and negative for Enterprise / Commercial demand," wrote the Wall Street analysts at MKM Partners in a note to investors this week. "We believe Cisco's mix is roughly 40% for the former group and 60% for the later."

As a result, the MKM analysts dramatically lowered their expectations for Cisco's upcoming financial quarter. They now expect the company to report overall revenues of around $10.5 billion, down almost 17% from initial expectations of $13 billion.

Thus, it's no surprise that Cisco announced Tuesday a new iniative aimed at propping up its enterprise business by essentially deferring customer bills until next year.

Cisco said the initiative, called the "Business Resiliency Program" and offered through the company's vendor financing Cisco Capital business, will provide up to $2.5 billion in financing to "provide organizations with access to the solutions they need to keep their businesses running and productive, their employees safe and support their communities during these unprecedented times." Reuters reported Cisco's vendor financing business already had almost $10 billion in loans and other instruments as of January.

"Whether it's technology, financing or helping those most in need, Cisco is committed to working together to fight this pandemic on every front," Chuck Robbins, chairman and CEO of Cisco, said in a statement. Cisco's other COVID-19 efforts include a pledge to avoid layoffs and hundreds of millions of dollars in local donations to fight the pandemic.

Under the Business Resiliency Program, Cisco said it will offer a 90-day "payment holiday" and will allow customers to defer 95 percent of their payments for either hardware or software products until 2021. After that, customers will be able to make monthly payments on their purchases.

Cisco's offer could act as a spending bridge for enterprises looking to cut costs. Indeed, in a recent survey of 50 CIOs in March, the Wall Street analysts at Nomura's Instinet found that fully half of respondents expect the virus to drive an annual decline in IT spending.

As noted by SDxCentral, Cisco's new financing program is similar to one announced by Cisco rival Hewlett Packard Enterprise (HPE) last week, which would provide around $2 billion in financing to cash-strapped customers.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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