Cisco’s New Success Formula Post-John Chambers

by Sohini Bagchi    Aug 14, 2015

cisco

The Cisco today is very different from what it was a year or two ago. While change is the only constant, especially in technology, Cisco’s transition in a relatively short time deserves a mention. It’s no secret that the networking giant is planning to grab a substantial market share in the cloud and software markets, but its recent moves in the security space through a slew of acquisitions last quarter has made some analysts think it is poised to take a big chunk of that space as well.

Hinting at Change

With John Chambers stepping down as the Cisco head last month, the company’s new CEO Chuck Robbins - who has only been in the job for less than three weeks - is already hinting at more acquisitions in the security space, as he said at the company’s recent quarterly results.

Cisco still dominates when it comes to selling networking gear to large enterprises and governments. But it was losing grounds when Chinese rival Huawei and French giant Alcatel-Lucent slowly started to eat into its business.

The advent of cloud computing was yet another challenge, when companies started renting out their data centers to the third party. When businesses can use cloud services from AWS, Microsoft and Google, why would they buy Cisco’s gear? Analysts believe with more companies outsourcing data center needs in the near future, Cisco will continue to risk losing a big chunk of its business.

The results were clearly visible. In 2014, Cisco reported an almost a 20% decline in earnings per share to $1.49. At the same time, sales declined 3%. But Cisco’s last earnings report shows the US-based company’s net income rose 3.2% in its fiscal fourth quarter ended July 2015, while revenue grew 4%. Cisco’s results topped expectations, and the company projected results for the current quarter in line with Wall Street estimates.

Read more: Cisco Targets Software And Security Deals

On an acquisition spree

A closer look at the ‘Cisco website’ shows, from April to August (until now) Cisco has already been on an acquisitions streak, with six purchases announced in less than five months. The tech major is looking to double or triple its share of enterprise security infrastructure spends, from 9% to 20% and 30%, according to SeekingAlpha report. This would mean that the company is looking to acquire more security companies.

Experts believe, the ball is now in Robbin’s court to make or break Cisco, to adapt or lag or to innovate or stagnate. Chances are he will succeed with greater focus on cybersecurity and taking the acquisition route (something the company has been very open about). Robbins has spent 17 years at Cisco and was most recently the company’s senior vice president of worldwide field operations. He has to ensure that Cisco continues to make up for last year’s decline and speed up for the next level of growth.

The company has already announced the buyout of the networking security company OpenDNS for $635 million in cash. The deal made sense for Cisco because OpenDNS’s technology gives the company a deeper insight of the potential security threats impacting organization’s infrastructure. Lately, Cisco has been buying up cloud-computing startups like its acquisition of Piston Cloud for an undisclosed amount. It’s also been focusing on building better software, an area Cisco never cared for so far.

The other intended acquisition is that of Pawaa that provides secure on-premise and cloud-based file sharing software. Cisco said in its blog, it is acquiring Pawaa to rapidly accelerate the data transfer capabilities of advanced platforms. 

Chuck O The captain!

However, it’s not just keeping up with technology and acquisition that will be the key to Cisco’s future success. Robbins will need to prove himself as a worthy successor to Chambers, as Forrester analyst Glenn O’Donnell told Fortune, “Chambers pretty much personifies the company and was its spiritual leader. He likens the relationship between Chambers and Cisco as being similar to the way Steve Jobs and Apple were so intertwined in the public eye.”

Robbins also announced two new additions to the Cisco leadership team. Zorawar Biri Singh, a former executive at Hewlett-Packard as CTO, who once led HP’s cloud computing efforts. Kevin Bandy, a former senior vice president of enterprise transformation at Salesforce.com will become Cisco’s chief digital officer and will oversee the company’s Internet of things business, which Cisco has been busy spending millions of dollars through research and acquisitions. These appointments give a sense of what Robbins wants Cisco to invest in over the next few years.

Read more: Finding the Right CEO for Your Company

“In the digital world, data—and the insights from that data—will be the most strategic asset,” Robbins wrote in a recent blog post. “It will be distributed across every part of our customers’ organizations and ecosystems.”

Clearly, every business is undergoing transformation to stay relevant as the world changes around them. And analysts believe Chuck’s Cisco, albeit a ‘new order’ from that of Chambers, is going to take a different route. It’s interesting to see how with all its new focus, Chuck can steer the ship!