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Cisco's Transition to Software Subscriptions is Paying Dividends

Cisco reported its' fully year fiscal 2018 financial results with revenue coming in at $49.3B for three percent year-over-year gain.

 By Sean Michael Kerner | Posted Aug 16, 2018
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2018 market another year of growth for Cisco, led in part by a shift toward software and the company's strategy toward intent based networking.

Cisco reported its fourth quarter and full fiscal 2018 financial results on Aug. 15. Fourth quarter revenue was reported at $12.8 billion, for a 6 percent year-over-year gain. Net income for the quarter was reported at $3.8 billion for a 57 percent improvement over the fourth quarter of 2017. For the full year, revenue came in at $49.3 billion for a three percent gain over fiscal 2017. Looking forward, Cisco provided guidance for revenue growth in the range of 5 percent to 7 percent year over year.

The fastest area of growth within the Cisco product portfolio is security, with Cisco reporting $627 million in fourth quarter revenue, representing a 12 percent year-over-year gain.

"Security continues to be our customers' number one concern, and it is a top priority for us," Chuck Robbins, CEO of Cisco, said during his company's earnings call. "Our strategy is to simplify and increase security efficacy through an architectural approach with products that work together and share analytics and actionable threat intelligence."

Cisco's infrastructure platforms, which include the company's routing, switching and data center products, reported $7.4 billion in revenue for a 7 percent gain.

"A year ago, we reinvented enterprise networking with the launch of our intent-based networking architecture," Robbins said. "This quarter we saw continued strength in infrastructure platforms driven by the Catalyst 9000 as customers look to us to simplify and automate their networks."

Cisco announced its intent-based networking strategy in June 2017 and has steadily ramped it up ever since. The intent-based approach is a combination of hardware and software, which is somewhat of a different model than Cisco has historically taken with its switching platforms.

"When we began the sale of the Catalyst 9000, that was the first attempt to sell a subscription software offering on top of a core networking product," Robbins said. "I'm very pleased with how the adoption has been from our customers. They understand the value, and you'll see us, over the next coming quarters when we bring new products to market across the portfolio, we will apply that same strategy."

SD-WAN

An emerging area for Cisco is SD-WAN, which it support with the Meraki platform, as well as its Viptela technology. Cisco acquired Viptela for $610 million in May 2017.

"On the Viptela front, we have been working hard on the integration between the Viptela platform and Cisco's products," Robbins said. "We haven't gotten the SD-WAN integration into DNA center yet, so that a positive boost when we get that done and teams are working on that. I think it's coming in one of the upcoming releases."

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

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