Cisco Grows Switching as Overall Profit Rises

Cisco CEO John Chambers is very optimistic about the continued growth prospect for his company in 2015 and beyond. Chambers’ optimism was made clear during Cisco’s 2Q15 earnings call, in which he detailed why switching is coming back and why he’s not afraid of white-box vendors.

For the quarter Cisco reported revenue of $11.9 billion for a seven percent year-over-year gain, while net income was reported at $2.4 billion. Looking forward, Cisco provided third quarter guidance for revenue growth in the range of three to five percent.

“Our results this quarter, which were the best results in three years in terms of balanced growth across all of our geographies, products, and segments, reflects the increased relevancy of Cisco around the world,” Chamber said during his company’s earning’s call. “The Cisco brand is as strong as it’s ever been.”

A core part of Cisco’s brand has always been its switching business. In the second quarter, Cisco’s switching business grew by 11 percent.

“We were especially pleased with the continued momentum of our Nexus ACI portfolio, including the Nexus 3K, Nexus 9K, and the APIC controller,” Chambers said. “As an example, the Nexus 3K plus 9K grew 350 percent year-over-year.”

In the second quarter, Chambers said that Cisco now has 1,700 Nexus 9K ACI customers, up from 970 in the first quarter of the year.

“We are pulling away from our competitors and leading in both the SDN thought leadership and customer implementations,” Chambers said. “The market has recognized the benefit of ACI as compared to PowerPoint concepts of aspirational competitors.”

Cisco has faced a particularly challenging environment in the switching market in recent years, and Chambers noted that the data center switching cycle is a very long one. Even though Cisco faces competition from white-box vendors, Chambers sees the convergence of switching, servers, storage and security as the key to the switching market.

“We are starting to win network refreshes over some competitors purely because of security,” Chambers said. “This is where we are going to really crush the white-label box people.”

Chambers emphasized that network switching requires a complete IT security architecture type of approach.

“If you just say, I am going to get merchant silicon and throw software on top of it and run data centers and run WANs and everything, all it takes is one breach and you have done more damage to your brand, company or government, then you could in 100 years of saving on a little bit of switching difference,” Chambers said.

Though Chambers is optimistic about his company’s switching revenue potential, he’s also a realist.

“Is switching going to grow double-digits? Of course not,” Chambers said. “But I think more down to the mid single digits, and we will go up and down depending on the quarter.”

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

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