Cisco CEO Optimistic as Switching Revenues Slip in Q2

Many areas of Cisco's business grew in the second quarter, and the Ericsson partnership is seen as a real key to future growth.

By Sean Michael Kerner | Posted Feb 11, 2016
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Though there is much reason for optimism, Cisco's CEO warned for some macro-economic challenges that have impacted his company's business during the second quarter of its fiscal 2016.

Cisco reported second quarter fiscal 2016 earnings on February 10, with revenue coming in at $11.8 billion for a two percent year-over-year gain. Net income was reported at $3.1 billion for the quarter, up by 31 percent over the second quarter of fiscal 2015.

Looking forward, Cisco provided third quarter guidance for revenue growth to be in the range of 1 percent to 4 percent year-over-year.

Cisco switching business had some challenges during the quarter, though CEO Chuck Robbins isn't too worried.

"The 4 percent decline in switching was largely driven by macro weakness in our campus business, something that we've observed in the past during volatile times as customers pause spending decisions," Robbins said during his company's earning call. "We saw our routing business grow 5 percent, driven by double-digit growth."

Of particular note is grown in Cisco's Software Defined Networking (SDN) effort, branded as Application Centric Infrastructure (ACI).

"In just two years, we have built ACI to a $2 billion run rate business that grew once again last quarter over 100 percent," Robbins said.

Robbins also emphasized that security remains the most critical priority for Cisco's customers, commenting that as everything connects, it makes the network even more relevant.

"I think what we saw was that our customers were spending in areas that are incredibly mission-critical for them, even in these times where there's uncertainty," Robbins said. "So you see them continuing to spend in security and you see them continuing to spend in the next-generation data center evolution."

"I think we saw customers, where they had the option to wait, they chose to wait a bit.," Robbins added.

One of the events during the quarter was Cisco's November announcement of a new go-to-market partnership with Ericsson.

"The Ericsson partnership has immediate opportunity with it, and we have begun to close transactions together," Robbins said. "So that partnership is going probably as well as we thought it would be at this point, and I think you'll really see the acceleration over the next 12 months."

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

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