Cisco security sales disappoint, DRAM drought dents results

It's okay, though, we've got an iPhone app coming soon says CEO Chuck

For a couple of years now, Cisco has said its future lies in selling more software, but it's not quite working out as planned.

In its fourth quarter 2017 (and full-year) results announced today, nobody was particularly surprised that hardware operations shrank (routing and switching both down by nine per cent to US$1.9 billion and $3.4 billion, respectively).

However, financial outlets like Reuters reckon what unsettled traders enough to lop 2.5 per cent off Cisco shares after hours was to see operations like its security business missing forecasts.

Until the last two quarters, security was one of Switchzilla's highlights, turning in reliable double-digit growth; this year, it reached $558 million, but that's a mere three per cent better than the same quarter in 2016.

The full-year result for security was better, with the segment adding nine per cent to top $2.1 billion. CEO Chuck Robbins reckons the forward orders are good enough that security will recover in the coming quarter.

Here's the full segment breakdown for the quarter:

Segment Q4 2017 $ (millions) Year-on-year change FY 2017 $ (millions) Year-on-year change
Switching 3,439 -9% 13,949 -5%
NGN Routing 1,893 -9% 7,831 -4%
Collaboration 1,113 -3% 4,278 -2%
Data Centre 837 -4% 3,228 -4%
Wireless 799 5% 2,766 5%
Security 558 3% 2,153 9%
Service Provider Video 227 -10% 946 -23%
Other 161 31% 554 53%

Not all the signs put Cisco's transformation in a bad light: recurring revenue reached 31 per cent of total revenue (up four per cent year-on-year for its fourth quarter 2017), the quarter's revenue of $12.1 billion was down four per cent on the year.

And the end of the tunnel is still unlit: CEO Chuck Robbins offered a horse-frightening one-to-three per cent year-on-year decline for the coming quarter (Q1 2018).

Switchzilla did, at least, manage a full-year growth: two per cent better than 2016 at $48 billion.

An iOS app might seem a thin ray of sunshine, but Robbins pulled it out alongside the company's deal with IBM as examples of Cisco's growth strategy: “We plan to deliver the first enterprise security application on Apple iOS and we're integrating our comprehensive security portfolio with IBM's Cognitive Security operations platform.”

These, along with a deal with Microsoft, were announced during the quarter just finished. Redmond will get the ability to run its operating systems on Cisco data centre switches within its Azure infrastructure, and Cisco's “fog computing” solutions will get an Azure tint so customers can run IoT applications in Redmond's cloud.

It's also worth pointing out that the ongoing instability in the DRAM market continues to hit Cisco's cost base. As CFO Kelly Kramer told the results call:

“The one and the biggest impact by far has been the increase of memory pricing and DRAM, specifically for the overall business that accounts for more than half of the two points decline.”

That leaves Cisco with limited opportunity to improve productivity, which along with a “slight uptick in pricing erosion” is the kind of thing that keeps CFOs awake at night. ®

Similar topics

Narrower topics

Other stories you might like

  • DigitalOcean tries to take sting out of price hike with $4 VM
    Cloud biz says it is reacting to customer mix largely shifting from lone devs to SMEs

    DigitalOcean attempted to lessen the sting of higher prices this week by announcing a cut-rate instance aimed at developers and hobbyists.

    The $4-a-month droplet — what the infrastructure-as-a-service outfit calls its virtual machines — pairs a single virtual CPU with 512 MB of memory, 10 GB of SSD storage, and 500 GB a month in network bandwidth.

    The launch comes as DigitalOcean plans a sweeping price hike across much of its product portfolio, effective July 1. On the low-end, most instances will see pricing increase between $1 and $16 a month, but on the high-end, some products will see increases of as much as $120 in the case of DigitalOceans’ top-tier storage-optimized virtual machines.

    Continue reading
  • GPL legal battle: Vizio told by judge it will have to answer breach-of-contract claims
    Fine-print crucially deemed contractual agreement as well as copyright license in smartTV source-code case

    The Software Freedom Conservancy (SFC) has won a significant legal victory in its ongoing effort to force Vizio to publish the source code of its SmartCast TV software, which is said to contain GPLv2 and LGPLv2.1 copyleft-licensed components.

    SFC sued Vizio, claiming it was in breach of contract by failing to obey the terms of the GPLv2 and LGPLv2.1 licenses that require source code to be made public when certain conditions are met, and sought declaratory relief on behalf of Vizio TV owners. SFC wanted its breach-of-contract arguments to be heard by the Orange County Superior Court in California, though Vizio kicked the matter up to the district court level in central California where it hoped to avoid the contract issue and defend its corner using just federal copyright law.

    On Friday, Federal District Judge Josephine Staton sided with SFC and granted its motion to send its lawsuit back to superior court. To do so, Judge Staton had to decide whether or not the federal Copyright Act preempted the SFC's breach-of-contract allegations; in the end, she decided it didn't.

    Continue reading
  • US brings first-of-its-kind criminal charges of Bitcoin-based sanctions-busting
    Citizen allegedly moved $10m-plus in BTC into banned nation

    US prosecutors have accused an American citizen of illegally funneling more than $10 million in Bitcoin into an economically sanctioned country.

    It's said the resulting criminal charges of sanctions busting through the use of cryptocurrency are the first of their kind to be brought in the US.

    Under the United States' International Emergency Economic Powers Act (IEEA), it is illegal for a citizen or institution within the US to transfer funds, directly or indirectly, to a sanctioned country, such as Iran, Cuba, North Korea, or Russia. If there is evidence the IEEA was willfully violated, a criminal case should follow. If an individual or financial exchange was unwittingly involved in evading sanctions, they may be subject to civil action. 

    Continue reading

Biting the hand that feeds IT © 1998–2022