Cisco Continues to Grow Data Center Biz in 2Q13

By Sean Michael Kerner | Feb 14, 2013 | Print this Page
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Networking giant Cisco Systems reported second quarter fiscal 2013 earnings late Wednesday, showing continued growth across multiple market segments.

For the quarter, Cisco reported Net Sales of $12.1 billion for a 5 percent year-over-year gain. Net Income was reported at $3.1 billion, which is a 44 percent improvement over the second quarter of 2012. Moving forward, Cisco provided third quarter guidance for revenue growth to be in the range of 4 percent to 6 percent, on a year-over-year basis.

"In summary, we believe that our Q2 results once again demonstrate that our vision and strategy are working," Cisco CEO, John Chamber said during his company's earnings call. "In simple terms, we did what we said we will do in what I think we will all agree is a challenging market."

From an acquisitions perspective, the second quarter was a busy one for Cisco.

"This quarter, we both grew and divested our portfolio to improve our innovation and provide for future growth and returns," Chambers said.

On the divestiture side, Cisco exited the Linksys home routing business. Cisco is selling Linksys to Belkin, in a deal that is expected to formally close in March of this year. Cisco has owned and operated Linksys since March of 2003, when the company was acquired for $500 million.

While Cisco is exiting the home networking market, it is increasing its presence in the small business networking market. Cisco is acquiring midmarket networking vendor Meraki for $1.2 billion in a deal first announced in November of 2012. Meraki's technology provides cloud managed wired and wireless networking hardware and software services.

Cisco also announced the acquisition of data center infrastructure automation vendor Cloupia during the quarter. Network planning vendor Cariden was acquired for $141 million in November. In December, Cisco acquired BroadHop for network policy management technology. Cisco also acquired mobile networking software vendor Intucell in January of 2013.

In addition to acquiring new technologies, Cisco also announced new ones of its own.

"In the Campus we demonstrated our continued innovation with availability of the Catalyst 3850," Chambers said. "It is the industry's first solely converged wired and wireless platform."

The Catalyst 3850 was announced at the end of January. The unified access switch is powered by the new Unified Access Data Plane (UADP) ASIC that Cisco invested $100 million in research development costs to bring to market. The UADP has up to 1.4 billion transistors on it and enables the convergence of wired and wireless networking.

Even with the Catalyst 3850 though, Chambers warned that the switching market is challenging.

"We do see the overall switching market as relatively flat and expect continued macro and government spending challenges to remain headwinds for this segment overall," Chambers said.

Data Center

One of the major highlights of Cisco's growth is coming from its data center business. Chambers reported that Cisco's data center business grew by 65 percent in the second quarter.

"We continue to see strong growth across all geographic regions with more than 20,000 UCS customers, up 87 percent year-over-year," Chambers said. "CIOs continue to tell us that UCS and Nexus are their primary strategy in the data center and they are increasingly evolving Cisco from a primarily a communications partner, to a strategic IT partner."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals Follow him on Twitter @TechJournalist.