Cisco: Falling revenues, but results beat expectations as it shifts focus

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Networking giant Cisco has reported Q3 revenues of $12 billion, down one per cent year on year, and profits of $2.3 billion, down four per cent from Q3 2015. Worryingly for the company, its core switching and routing businesses experienced a significant fall-off in revenues: down three and five per cent, respectively.

However, the results beat analyst expectations for the technology bellwether, allaying Wall Street fears of a more significant downturn in the US technology sector.

Cisco’s internal shift of focus towards collaboration, software, and subscription-based services under CEO Chuck Robbins is evidenced by a surge in video revenues, up 18 per cent on the year-ago quarter to $468 million, and security products, up 17 per cent year on year.

Collaboration is one of the big four areas of focus for the company, said Robbins: “[Collaboration] revenue accelerated by ten per cent, and deferred revenue here grew 16 per cent. This is yet another example of a successful transition to a cloud-based platform, increasing our market leadership which we expect will give us sustainable long-term differentiation.”

Security and next-generation data centre offerings are two further core areas, but the fourth is the big one: the shift towards software and subscriptions. Said Robbins, “Our software subscription deferred revenue balance continues to exhibit accelerated growth this quarter, up 36 per cent. We have a number of strong proof points of how we have executed successfully against our objective and the potential to apply the same model to the rest of our portfolio.”

Overall, Cisco delivered “strong Q3 results against the backdrop of a macro environment that continues to be uncertain,” said Robbins. “Our commitment to operating discipline continues to yield solid results in spite of the challenging environment. The operational changes we continued to make will further enable our customers to leverage strategic roles to network (sic) as they transform their businesses to become digital.”

About Author

Chris Middleton

Chris Middleton is a widely respected business and technology journalist, author, and magazine editor. In recent years he has been Editor of Computing (where he remains Consulting Editor); co-founder and Managing Editor of Professional Outsourcing – a magazine he developed from scratch and grew to be the leading magazine in its field; Editor of CBR in its most successful year; and co-founder and launch Editor of Sourcingfocus.com. Today, he is co-Director of EastwoodMiddleton Publishing, and founder, designer, and Editor in Chief of Strategist magazine (UK), the boardroom magazine that provides strategic insight for business leaders, and of its mobile-first digital edition at www.iamtheStrategist.com. He is also co-founding Editor of Child Internet Safety magazine, and a contributing Editor of Diginomica.com. Over the years Chris has also written for, among many others, The Guardian, The Times, the BBC, and Computer Weekly. He is the author of several successful books on digital media, and a commissioning editor of more than 50 books.