Cisco reported overall revenue of $12.45bn for the second quarter of its fiscal 2019, nudging just ahead of analyst expectations.
We delved into the numbers and picked out the key takeaways from the report and earnings call.
Routing and servers on the decline
The networking manufacturer reported that total product revenue was up nine per cent year-on-year to $9.3bn.
It also stated that its infrastructure platform grew six per cent, while its switching and wireless segments both saw "double digit" growth compared to the same quarter last year.
However, the vendor reported a decline in its routing market due to what it claimed was a "weakness in service provider". It also saw a decline in its datacentre servers market, but stated that this was offset by strength in the hyperconverged space.
Software subscriptions contributed 65 per cent to Cisco's total software revenue, up 10 points year on year.
"We continue to transform the business delivering more software offerings and driving more subscriptions," CFO Kelly Kramer said on an earnings call, which was transcribed by Seeking Alpha.
Dodging political obstacles
The global political climate was very much to the fore of the conversation between Cisco and investors, with CEO Chuck Robbins fielding questions on the recent US government shutdown, as well as the ongoing trade war with China and wider economic unknowns, such as Brexit.
Robbins stated that Cisco saw "minimal impact" from the 35 day long US shutdown, adding that some of its government customers placed orders in advance of the shutdown and that its federal business grew doubled digits during the event.
"I've been amazed at the resilience that we've seen around the world in light of all of the macro environment and the geopolitical dynamics, whether it's a shutdown or it's US-China trade or it's Brexit or it's stress in Italy, or it's political unrest in certain emerging countries," Robbins said on the call.
"Our enterprise customers, given the focus, they don't view this technology as an optional enabler of a strategy that they've come up with any more. They now view the technology as a core part of their strategy.
"Most of them have a paranoia that if they do stop investing, their competitors will not and they'll fall behind."
Enterprise orders down
Addressing one investor's concerns about the decline in enterprise order growth, from 15 per cent in Q1 to 11 per cent in this quarter, Robbins said that he expects the further enterprise implementation of newer products to boost this figure in the future.
Namechecking offerings, such as the Catalyst 9000 switch and SD-WAN solutions, Robbins said that they are still in "very early innings" and that customers are still at the front end of deploying these technologies.
"We feel good about where we are," he said.
"Assuming we continue to execute well on that technology and that portfolio, I think that we should have a pretty successful run ahead of us in our enterprise accounts assuming we continue to execute."
Huawei's problems are Cisco's gain
Robbins fielded questions specifically around Cisco's global opportunity in the face of Chinese rival Huawei's ongoing problems with prohibitations in several countries' national infrastructure.
Cisco has a relatively small presence in the Chinese market, and Robbins stated that that market "skews" the overall market share numbers, and that an absence in that market makes it difficult to gain global share.
"We've begun to look at it [our market share] without China and with China, just to see how we're doing," he explained.
"I would put our innovation up against there as anybody else's in the world right now. I feel very confident that not only can we compete, but that we are and we're winning right now… in other parts of the world, I'll tell you we're doing really well right now."
Cloud complexity reaps dividends for networking
Customer expectations of what a move to a hybrid cloud environment involved has changed significantly in the past five years, according to Robbins.
He explained that while a move is expected to be simple, clients have become bogged down with complicated infrastructure and now are starting to move certain applications back from the cloud onto networks.
"The reality is that they've now found themselves with a more complicated environment than they had five years ago when they began this journey to simplification," he claimed.
"That's the irony. There's only one piece of technology that is consistent across multiple cloud providers, SaaS providers, the explosion of IoT - and that is the network.
"So what's happening is a lot of the things that have to occur to help customers navigate this, need to happen in the network.
"They've now gotten to a place where they're repatriating certain applications from the cloud."
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