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Cisco Looks to Beat White Boxes Where They're Strongest

Mitch Wagner
5/19/2016
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Cisco is looking to beat the threat of white box networking hardware by addressing the business reasons why white boxes are attractive to network operators, CEO Chuck Robbins said on the company's earnings call Wednesday afternoon.

"There's a misconception that's driving the belief that all customers want to buy white box switches," Robbins said. Similar misconceptions underly the move to cloud and SDN. The misconception is that customers are attracted by the technology. But they're not -- they're looking to technology to solve business problems, the Cisco boss said.

"None of these customers are chasing a technology trend. There are underlying business drivers leading to these solutions," Robbins said.

Cisco faces the competitive threat by attacking the business drivers, not the tech tend, he said.

Web-scale network providers are looking for "significant automation," Robbins said. They "want to run massive data centers at huge scale, very low cost, with a ton of automation, which over time will become the norm for most customers," he said. Cisco addresses the white box threat by building products that meet those business needs, including improved ASICs for better price-performance.

Also on the earnings call, Cisco touched briefly on the Ericsson AB (Nasdaq: ERIC) partnership, saying the pairing will rev up near the end of the year. The two companies signed a memo of understanding in September, and are now finalizing the term sheet, getting ready to go to market with early products and solutions, with first results expected late this year, Robbins said. (See Cisco + Ericsson: From Soup to Nuts.)

Cisco delivered year-over-year revenue growth of 3%, to $12.1 billion, beating expectations by $30 million, with non-GAAP EPS of $0.54, up 6%, beating expectations by $0.02. The company says it saw momentum in four key areas: security, with revenue up 17% and deferred revenue up 31% year-over-year; collaboration, up 10% overall, 16% deferred. The company also claimed to be strong in Next Generation Data Center, without revealing growth specifics, and in shifting more of its revenue to recurring software and subscription revenue, which grew in double digits. (See Cisco Gives Its Software Licensing a Makeover

For Q4 guidance, Cisco said it expects revenue flat to up 3% year-over-year, with non-GAAP earnings per share $0.59 to $0.61.

Cisco traded at $28.26, up 5.76%, after hours Wednesday.


Find out more about white box switches at our upcoming Big Communications Event in Austin, Texas, May 24-25. Register now!

Cisco sees several strengths into the second half of calendar 2016: Collaboration tools are transitioning to the cloud and enjoying double-digit growth. Security is also moving to software and subscription services. Meraki is making the transition to cloud-based networking and policy, and Cisco has similar plans for the rest of its portfolio, Robbins said.

Switching and routing revenue were dark spots in the results, with switching revenue down 3% year-over-year to $3.4 billion, and routing down 5%, to $1.9 billion.

Service provider product orders were flat year-over-year, and enterprise down 2%. On the other hand, public sector product orders were up 6%; commercial up 8%; and total Cisco product orders were up 3%.

Service provider CPE video business was $93 million, reflecting one month of results as the business was divested November 20. (See Cisco Sells STB Unit to Technicolor for $604M and Technicolor Closes on Cisco Set-Top Business,

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— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Enterprise Cloud, Light Reading.

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