Cisco’s Back With A Bang; Bets Big On India

by CXOtoday News Desk    Feb 13, 2015

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Cisco Systems CEO John Chambers seemed highly optimistic on the company’s growth, as the US IT networking major reported its highest revenue growth for three years, following prolonged weakness, as its shares climbed 5.9 per cent in after-market trading. Its revenues rose 7 percent in the three months to the end of January to $11.9bn, compared to Wall Street expectations of $11.8bn.

Cisco has faced stiff competition in network-switching equipment, its biggest single product category. In addition to competing against makers of conventional hardware, Cisco also faced the heat from emerging players pushing software-defined networking, or SDN, a shift expected to reduce purchases of inexpensive commodity switches and other hardware with open virtualization techniques.

Chambers, upbeat on the revival stated that rapid order growth in new markets such as software-defined networking showed that three years of investment was starting to pay off. “Most companies resist changing until it’s too late and their market position is eroding,” he said.

The company responded with an overhaul of its switching line and a variant on SDN that runs on those new switches. Cisco said switching revenue rose 11% to $3.6 billion in the second quarter—up from a 3% increase in the first period—and said 1,700 customers had already bought the new products.

“We took a chance on disrupting our own switching business with the radical change to its hardware, which is now paying off after several down quarters as customers evaluated the benefits of the new technologies,” Chamber told WSJ.

Cisco’s strong quarter was a sharp contrast to recent earnings reports from tech companies such as IBM and Microsoft, which dwindled as they try to reposition their businesses for the cloud computing era.

Despite that, a decline in orders from telecommunications service providers and continued weakness in some parts of the emerging world weighed on the company’s growth. While orders from China fell 19 percent, the company is bullish on countries such as India and Mexico rebounding, Cisco said its total business with emerging markets was up 1 percent.

The $48-billion networking major is aiming to grow its business in the country. In a recent interview Chamber highlighted that the company is betting big on the Indian market. “You’re going to see us making huge commitments to the country. Partner with many of the Indian companies. Work on smart-cities together. And help the dream the country has on all levels,” he said.

The company has 14 thousand employees in the country and is doubling down its workforce in the coming months, while partnering with companies and working on smart cities and other IoT areas with the Indian government.

Cisco’s Chief Technology & Strategy Officer Padmasree Warrior told BusinessLine that smart cities is a priority area for the company and it will create products that not just serve the India market but also serve global markets.

Cisco’s 8,000-strong engineering team in Bangalore is working on enabling Smart City solutions, innovating in core products and also supporting the larger product areas that the company is focused on globally, including data centre, cloud, security, mobility services and Internet of Things. Warrior believes that Cisco’s unique innovation strategy will help position the company as a software services and solutions leader.

The company has partnered with L&T in the IoT space, and with ITL in the area of transportation for smart city deployment to drive growth and innovation in the country, while looking to earn a chunk of its revenue from the market.