Amid IT spending pause, Cisco's collaboration tools stumble

Summary:Cisco's growth market is servers, but seasonality will kick in. Is enthusiasm for telepresence drying up?

At Cisco Systems, servers and integrated servers are in and collaboration and video are out.

Cisco, a tech bellwether, cut its outlook for the fiscal fourth quarter and said that enterprise IT spending was shaky. Specifically, Chambers said:

When I talk to our customers, they do not see that occurring in their environment and even in the areas that have been going slow like service providers and financial services have said their plans are to spend more in the second half of the year. However, in the very next sentence they said we are waiting to see what happens in Europe and what happens with government policy.

Certainly, a slowdown in Europe is giving CEOs pause. India's economy is also slowing down.

Given the dicey outlook, it's worth noting what businesses are in at Cisco and out.

Related:

UCS: A growth market for how long?

UCS: A growth market for how long?

Amid IT spending pause, Cisco's collaboration tools stumble

UCS server and data center revenue is clearly in. Cisco made a big splash working with EMC and VMware in a partnership pushing integrated systems. It's working---albeit from a small base. Chambers said:

Our strategic partnership with EMC and VMware is going extremely well. This quarter all geographies saw strong cloud architecture growth with the emerging countries leading the way. In service providers we are now at a $1 billion order run rate in terms of their cloud implementations. The key take-away is not only that our data center business is going strong, but our industry leadership in the cloud is becoming broadly accepted across leading customers around the world.

The catch: UCS revenue was up 57 percent from a year ago, but Cisco will see the usual server seasonality as the unit grows.

On the downside, collaboration, video and unified communication tools are being questioned. Chambers added:

Our Q3 performance in collaboration being flat is not where we expect to be. And as you would expect, we are putting an aggressive action plan in place with specific focus on our sales execution. Part of this challenge is market-driven and part of it is our need to execute more effectively. More specifically on collaboration, increased sales of IP phones within our unified communication products were offset by sales decline in other products in the portfolio. Our telepresence business for example historically had tremendous success in the public sector and enterprise markets. As we saw continued pressure in public sector and enterprise spending we also saw the impact on our telepresence results.

The broader question is whether telepresence investment is sliding. After all, Polycom's has struggled too. Chambers noted that he was confident Cisco's collaboration fortunes would turn around based on open standards and new products.

Topics: Enterprise Software, Cisco, Collaboration, Servers, Social Enterprise, Software

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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