Cisco revenue up, profits down after makeover

The networking company which is retrenching around its core router and switch products at the behest of chief executive, John Chambers, has seen its revenues growth and new UCS and Nexus technologies gain a foothold in the enterprise
Written by Jack Clark, Contributor

Cisco anticipates a major slowdown in Europe but is confident it can keep big customers in the US, as it tries to fend off Chinese upstart Huawei.

The San Jose-based networking giant reported a net income of $1.8bn (£1.13bn) on Wednesday, down 7.9 percent on the previous year's results but up $600m, 4.7 percent, on the previous quarter. Overall revenue was better, coming in at $11.26bn, up 4.7 percent on the previous year and $60m on the last quarter.

"Even in times of limited capital spending, intelligent networks are being deployed to drive new business, revenue and consumption models, enable new customer and employee experiences, and drive efficiencies," the company's chief executive, John Chambers, said in a statement. "Cisco's leadership in networking, video, collaboration and cloud, offered together in an integrated architectural approach, uniquely positions Cisco as a strategic business partner."

However, trouble in the global economy has caused the networking giant to give a conservative analysis of future revenue, expecting growth of around seven to eight percent in the coming year. Europe is a problematic place, Chambers said, with the financial confusion in the region causing Cisco to anticipate single-digit revenue growth there after the region managed to grow 13 percent in the first quarter.

When it comes to growth, the company's Unified Computing System (UCS) servers are up 116 percent by revenue over the past year, contributing $1bn to the bottom line. This growth has had a knock-on effect on its new Nexus 2000 and 5000 switches, which are tied very tightly to UCS, the company said. Its UCS range saw revenue growth of 80 percent, to contribute another $1bn to the overall total.

Chambers was pugnacious about the competition: "We are more aggressive on the competition, we are going to be tough on our competitors, whether they are Juniper or HP and Huawei and Avaya," he said in response to a question from an analyst.

Cisco is readying for a fight with Huawei on its home turf, Chambers said, saying Cisco will "make it hard on them in the US, and we're going to be very tough."

"They're going to be a tough competitor. We're just going to try to make it as tough as we can on them," he said, "and we plan to beat them. But they'll be around four or five years from now."

Huawei has admitted to ZDNet UK that it faces trouble in the US, acknowledging that, besides corporate enemies, it also has to deal with a government that blocks it from bidding on contracts and keeps it out of core infrastructure.

Cisco's changes

The changes which Chambers initiated in April, have begun to take effect, he said, with the firings, product culls and reorganisation all contributing to a better outlook.


"Our goal over the past two, three quarters was to simplify our operation model and focus on our organisation" he said. "Our customers had validated that we have done just that. They understand the values that Cisco's franchise delivers to them."

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