Cisco: Where We Are (Part 1of3)

SAN JOSE: Celebrating its 30th anniversary – featuring music from the ’80s and birthday cupcakes – Cisco Systems also hosted journalists and analysts for a three-day deep dive on who they are today, where they came from, and where they intend to go, including a significant extension of their capabilities. Ultimately the customers will decide if their bread-and-butter switching and routing business will continue to fuel their new-and-or-expanded aspirations in cloud, , security (including the just-announced acquisition), software-everything, the Internet of Everything and Big Data, but if their track record – including its runaway success in converged systems – is any indication, then look for them to continue to be a dominant vendor for the foreseeable future.

is one of the most innovative companies, not only in networking, but also the broader IT market, noted analyst Zeus Kerravala in a recent column. From the Massbus-Ethernet Interface Subsystem, an interface card made for DEC computers, to the Catalyst 5000 switch, Nexus 7000, voice-over-IP, telepresence, Unuified Computing System (, AKA converged systems), (, AKA ), Fast IT and a dominant position in a broad range of IT certifications, the company has largely flourished as the IT industry prospered.

The history of Cisco is market transitions, said Chairman and CEO John Chambers. “We see around corners… we see the things 3, 5, 10 years ahead of the opportunity.”

While revenues were flat and net income down slightly for its last quarter, Cisco had plenty of positives to point to, including:

-enterprise routing: top vendor in the enterprise router market, which grew 8% in 3Q14 from 2Q14, to $934 million; the enterprise router unit shipments fared better, increasing 10% sequentially and 6% year over-year;

-service provider routing: market-share leader for the service provider router market, and together with Alcatel-Lucent, Juniper Networks, and Huawei Technologies accounted for over 94% of third quarter revenue;

-WLAN: Wireless LAN market grew 8% in the third quarter 2014 versus the year-ago period, Enterprise-class 802.11ac-based radio access points grew 40% quarter-over-quarter, and the top three vendors in the combined Enterprise-Class and Outdoor Mesh Nodes category were Cisco, Aruba Networks and Ruckus Wireless;

-storage networking: number one in combined FC and FCoE revenues, and FC Modular share, while the FC Fixed share grew 8% year-over-year;

-: Cisco Services’ revenue increased for the 46th quarter in a row, up 4.5% on a year-to-year basis, to $2.8 billion in 3Q14, and now accounts for 30% of total Cisco revenues, the second largest revenue contributor to Cisco Systems;

-cloud: along with Microsoft, IBM, Amazon, and Google, Cisco was rated a top  cloud service provider (CSP) for the North American enterprise market;

-: for the most recent quarter Cisco grew its server business to 6.2% market share, on 31% revenue growth, surpassing Oracle to move into fourth position, behind HP (down 140 basis points to 26.5%), IBM (fell 500 bps to 18.2%) and Dell (up 80 bps to 17.8%);

- (servers and storage and/or networking): unlike the overall server market, CI is exploding, more than 50% YoY to $6 billion in 2014, and Cisco, through its VCE and NetApp partnerships, holds down two of the top three positions (Oracle was in third place, with HP, IBM and Dell landing just outside Gartner’s leader quadrant); and,

-SDN: Cisco has seen decent early uptake from its enterprise installed base for its ACI/APIC SDN/networking virtualization solution, claiming more than 900 Nexus 9000 (data center switch) and ACI customers at the end of its October quarter.

In Part 2 I’ll dive a little deeper into what Cisco is doing while Part 3 will look at its future plans.

DISCLAIMER: Cisco, which is in my investment portfolio, but is not a customer, looked after transportation and accommodation expenses.

Author: Steve Wexler

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