Cisco 3Q15: Service Provider Revenue Down, Enterprises Up

The whitebox threat turned out to be "garbage," Chambers says.

By Sean Michael Kerner | Posted May 14, 2015
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John Chambers, set to become the wingman for new Cisco CEO Chuck Robbins, hosted his final earnings call as Cisco Chief Executive Officer on May 14, providing color on his companies financial highlights and the road ahead for his successor.

For the third quarter of fiscal 2015, Cisco reported revenue of $12.1 billion for a 5.1 percent year-over-year gain, while net income was reported at $2.4 billion for an 11.7 percent gain. Looking forward, Cisco provided guidance for fourth quarter revenue growth in the range of 1 percent to 3 percent.

Cisco's business was mixed across its segments, with the global service provider market declining by 7 percent, down by 17 percent in the U.S. In contrast, Cisco's global enterprise business was up by 7 percent.

"In enterprise, the shift to selling outcomes, not products, is resulting in larger opportunities and dramatic increases in pipeline," Chamber said during his company's earnings call. "In U.S. enterprise, for example, the value of our pipeline of deals over $1 million increased approximately 60 percent year over year, with the average deal size up over 30 percent."

Switching, an area where Cisco has been evolving its business in recent years, saw year-over-year growth of 6 percent. Chambers said that Cisco's application-centric infrastructure (ACI) portfolio is powering momentum forward.

"We added over 970 new Nexus 9000 customers and ACI customers this quarter, to reach a total over 2,650 customers," Chambers said.

Chambers also struck back against critics that have claimed that whitebox open switching would eat into Cisco's switching business, noting that switch revenues have been consistent over the last eight quarters.

"So all this garbage about new players coming in and software coming in and white label killing our approach was entirely wrong," Chambers said. "The bottom line on switching is, we're taking share, we feel really good, we're going to kick the other competitors, and it's a very good growth market, and I will never apologize for growth in mid-single-digits on switching."

Chambers also highlighted Cisco's success in the server market with its UCS platform. He said that the UCS now has a $3 billion revenue run rate, with over 43,800 UCS customers. UCS is also tied to Cisco's continued push into the cloud with the open-source OpenStack platform.

"Within our strategy to work across hypervisors and stacks, we continue our investment in OpenStack with the launch at our Worldwide Partners Conference of Cisco OpenStack Private Cloud Solutions, aimed at on-premise cloud capabilities for application developers," Chambers said.

Cisco announced on May 4 that Chuck Robbins would be replacing Chambers as CEO on July 26, and during the call, Chambers clearly articulated what his role will be.

"Let me first say it very crisply. Chuck is the CEO, period. He will make the decisions, I will be an advisor to him and I'll be very involved where he wants me to be," Chambers said. "The things I love most are vision and strategy. I love time with customers, strategic partnerships, acquisitions, and whatever else Chuck wants me to do, I will be his wing man."

Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist.

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