Announcing Cisco’s first-quarter earnings Wednesday, CEO John Chambers highlighted SDN and security as key growth areas offsetting losses elsewhere and dropped the surprise announcement that CFO Frank Calderoni will retire on Jan. 1, to be replaced by Senior Vice President Kelly Kramer.
Cisco‘s revenue for the period ending Oct. 25 hit $12.2 billion, for non-GAAP earnings of 54 cents per share — a 2 percent uptick in sales from same quarter last year, and just edging past Wall Street expectations of 53 cents per share.
“We are winning the SDN battle with Application Centric Infrastructure [ACI]” in the data center, Chambers said near the beginning of a call with investors. Cisco’s data center revenue was up 15 percent year-over-year. Data center switches drove 3 percent growth in switching, the company’s largest business line and one that had seen three straight quarters of declines.
Cisco’s Nexus 9000 switches, which are designed to support ACI, appear to be gaining traction, with the customer base growing to 900 last quarter, a 60 percent jump from prior quarter.
“A year ago, we were fighting an SDN perception battle with competitors using PowerPoints instead of products,” Chambers said on the call. “Now we are in the market with products and solutions, and don’t see either traditional box competitors or the PowerPoint newcomers able to keep up. And for those of you who were concerned about SDN’s effect on our switching margins, our switching gross margins have been incredibly consistent over the last five to six quarters.”
Cisco saw its biggest revenue growth in security, up 25 percent from a year ago. But the company posted double-digit revenue declines in service provider video, collaboration, and “other products.”
Chambers acknowledged that Cisco faces headwinds on several fronts, projecting that sales would grow 4 to 7 percent in the current quarter, compared to consensus expectation of 8 percent growth.
That disappointing forecast is primarily due to setbacks in emerging markets and declining expenditures by U.S. service providers, said Chambers, pinning the telco cutbacks squarely on the back of the net neutrality debate.
Carrier spending “will be down dramatically more if we don’t address these Title II issues,” said Chambers, referring to President Obama’s proposal to reclassify consumer broadband as a regulated utility under Title II of the Communications Act.
“If they can’t make money on broadband buildout, they aren’t going to build it out.”