Cisco to sell everything-as-a-service – even core networking hardware – and cut costs by a billion bucks
Q4 revenue took a nasty kick in the COVIDs, but profit bounced anyway
Cisco CEO Chuck Robbins says his IT giant is considering an as-a-service offering for its core networking hardware.
Speaking on the company’s Q4 2020 earnings call, Robbins’ first duty was to detail quarterly revenue of $12.2bn, a nine percent year-on-year drop, and a five percent dip in annual revenue to $49.3bn. Both falls were attributed to the COVID-19 pandemic, which didn’t dent net income for the quarter as that metric rose to $2.6bn, a 19 percent year-on-year bounce.
That wasn’t the only piece of good news Robbins wanted to share: he said the company has sailed past “transformation” goals it set in 2017 to secure 30 percent of revenue from software and achieved that number in Q4 and hit 29 percent for the entire financial year. Another goal was to win half of revenue from software and services: for the full year the company hit 51 percent. The last goal was for two thirds of software sales to be sold as subscription. That rate has now reached 78 percent.
Robbins said Cisco isn’t done moving to subscriptions. “We're even looking at how we deliver our traditional networking hardware as a service over time,” he said.
“I'd say that it's clear that many of our customers do want to consume the technology as a service,” he told investors, adding “we're currently looking at the entire portfolio to see how deeply we can get into the portfolio relative to delivering as a service, and I think we'll have a lot of that in the marketplace by the end of the calendar year.”
I'd say that it's clear that many of our customers do want to consume the technology as a service
Cisco needs to get it out there sooner rather than later as rival HPE is going hard with its Greenlake technology-as-a-service offer.
There’s more change to come, with Robbins saying the company plans to “accelerate our investments in the following areas: cloud security; cloud collaboration; key enhancements for education, healthcare, and other industries; increased automation in the enterprise; the future of work; and application insights and analytics.”
But its not all sunshine and rainbows: the CEO also said: “Over the next few quarters, we will be taking out over $1 billion on an annualized basis to reduce our cost structure.”
For Q4, Robbins said security sales rose ten percent, but infrastructure revenue fell by 16 points. Data center sales were described as “particularly weak with the decline of the market and DRAM price declines.”
If you’re after some insights into how the pandemic is being felt around the world, perhaps Cisco’s view of its world offers an insight: CFO Kelly Kramer said revenue in the Americas was down 11 percent, while EMEA sales fell six percent. The Asia-Pacific and Japan slumped 13 percent, but merging markets had the worst of it, down 19 percent while the BRICS bloc – the combination of Brazil, Russia, India and China that is held to represent the world’s emerging economies – dropped 26 percent when the performance of Mexico was included. ®