Cisco: Good results and leading Gartner’s Magic Quadrant, but challenges remain for CEO Robbins

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IT industry bellwether Cisco has issued better than expected quarterly results. The networking equipment giant has reported Q4 profits of $2.3 billion (up 3.2 per cent), on revenues of $12.8 billion (up 3.9 per cent): the fourth sequential quarterly revenue improvement. Cisco is forecasting Q1 2016 revenue gains of between two and four per cent.

The results come just a fortnight after new CEO Chuck Robbins took over from 20-year veteran John Chambers. Robbins described a “an infectious energy” emerging over the past three months, and has set about refocusing the company on its most promising and profitable lines. “Cisco’s best years are ahead of us,” he said.

But not everything in the Cisco garden is rosy: the positive results have mainly been thanks to rebounding sales of its traditional switching and routing lines in the Americas market, which accounted for 61 per cent of total sales across Cisco’s business. Sales in Asia and elsewhere were largely flat – with a three per cent decline in China.

The traditional sales-driven focus of Robbins – whose heritage is in flogging product, not strategic planning – may prove to sit uneasily in a market driven by software-driven innovation and software-defined networks.

Hopefully, Cisco will use the money from its recent spurt of divestments, such as the $600 million sale of its set-top box business to Technicolor – to focus on hothousing R&D. The company has said it is investing in data analytics software, security lines, and cloud management systems.

Cisco remains the top supplier of networking equipment to businesses, with half of a global market worth $38 billion. Yet one of the key challenges it faces is the emergence of low-cost Chinese competitors, such as Huawei, who may be able to push innovative hardware to market faster, cheaper, and with the advantage of a domestic labour pool that is four times larger than than of the US – and much less expensive to employ.

Huawei, Lenovo, and others are expanding fast in Europe and elsewhere: all markets that Cisco needs to hang onto to retain the number one spot.

The promise of UC&C

Unified communications and collaboration – where Gartner has positioned Cisco as a Magic Quadrant Leader, alongside Microsoft, Avaya, and Mitel – may provide one of the answers. Cisco Spark, the company’s cloud-based team collaboration tool was launched in March 2015 and pits the company against products such as Microsoft’s Office 365, Unify’s Circuit, Huddle, and Interactive Intelligence’s PureCloud.

But it is just one part of the wider Cisco Cloud Collaboration Platform, and it is likely that Cisco will begin to move many more of its capabilities onto the Platform, including conferencing, UC management, and video. Cisco has recently posted a royalty-free video codec, THOR, on GitHub.

“The stakes for vendors in the enterprise UC market are exceedingly high and, in some cases, existential,” says Gartner in its UC Magic Quadrant, published this week, with the prizes going to those vendors who can help customer optimise, simplify, and manage their business processes.

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.