Cisco CEO Confident of Cloud Growth, as Revenue Guides Lower

The market outlook for Cisco isn’t quite as rosy as some had wanted, but that doesn’t mean that innovation is stalled or that there isn’t opportunity on the horizon.

Cisco unveiled its first quarter fiscal 2016 financial results on November 12, reporting revenue of $12.7 billion for a 3.6 percent year-over-year gain. Net income was reported at $2.4 billion for a 32.9 percent year-over-year gain. But looking forward, Cisco’s guidance for the coming quarter is causing some concern in the financial markets. Cisco is providing second quarter fiscal 2016 guidance for revenue growth in the range of zero to two percent.

“I recognize that our Q2 guidance that we just provided is below what the market had expected. In Q1 we saw lower-than-expected order growth, driven largely by uncertainty from macro and currency impacts, primarily outside the U.S,” Cisco CEO Chuck Robbins said during his company’s earnings call.

Though guidance for the second quarter isn’t very optimistic, Robbins emphasized that his own personal views on Cisco’s future are still very positive.

“As I look back at the last 90 days and my first quarter, I am more optimistic than ever about Cisco’s future,” Robbins said. “Yes, the guidance we just gave for Q2 is lower than what the market had expected, and I don’t take that lightly. But for me, nothing has changed in how I feel about the business.”

From a strategic perspective, Robbins is bullish on the cloud, both public and private. He commented that it is increasingly clear that all of Cisco’s customers want both public and private cloud capabilities in a hybrid cloud.

“On the public cloud side, Cisco is a leading provider of infrastructure to web-scale and service provider customers as they build out their public cloud infrastructure,” Robbins said. “As just one data point, our business with the largest web-scale players grew over 20 percent again this quarter.”

In the enterprise, Robbins noted that UCS server growth is also indicative of private cloud opportunity.

“Customers are still building out data centers and still building out private cloud to take advantage of the requirements they have in high-performance applications, security, mission-critical nature,” Robbin said.

Looking at Cisco’s core switching and routing business, Robbins is also optimistic, even as Cisco continues to transition to next-generation product lines.

“What I’ve said about our switching business is that in the second half of the year, we expect the inflection point between the next-generation volume and the historical generation to hit,” Robbins said.

Cisco’s routing business declined by 8 percent in the first quarter. Robbins is confident, however, that routing will bounce back, thanks in part to some new product introductions set to be announced in the coming weeks.

“So we feel pretty reasonably well about our routing performance over the coming quarters,” Robbins said.

Robbins is also bullish on Cisco’s prospects in the security market, commenting that Cisco added 2,000 new AMP (advance malware protection) customers in the quarter. Overall, Robbins said that he’s looking at all options on the table to grow Cisco.

“As we look at the future and we look across our entire portfolio candidly, we are assessing what our customers need from us and what solutions they’d like to see from us,” Robbins said. “We will leverage R&D. We’ll leverage M&A. We’ll leverage co-development. We’ll leverage strategic partnerships, and we’ll move on any one of those fronts across any area that we need to fulfill the solutions that our customers are looking for.”

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

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