CEO John Chambers sounded downright giddy on Cisco‘s earnings call with investors Wednesday, vowing to seize on disruptive trends in network technology as the company announced strong financial results for its second quarter, which ended Jan. 24.
Cisco‘s non-GAAP net income on the quarter was 53 cents per share, a 13 percent increase from the same period year prior, beating the consensus estimate of 51 cents. Revenue grew 7 percent from the year prior, to $11.9 billion. Analysts had expected revenue of $11.2 billion.
Experts see Cisco as the incumbent with the most to lose as network infrastructure shifts toward virtualization. But touting Cisco’s results as early evidence of a successful pivot, Chambers promised to seize on those shifts and capitalize on the Internet of Things.
“In the 90s, we were the best example of a company that capitalized on the Internet,” Chambers said on the call. “In a lot of ways, the opportunity today feels like the opportunity of the Internet in the 90s,” Chambers said of IoT.
Chambers revealed that Cisco’s reorganization had shifted 40 percent of employees to priority areas of focus, with the company replacing more than 30 percent of its leadership as well — all of it in an attempt to stay ahead of the major changes coming in its markets. “I’m not sure those outside Cisco understand the magnitude of the changes we have undergone in the past year,” Chambers said.
He also name-checked The Innovator’s Dilemma, the 1997 book that popularized the notion of disruptive innovation, vowing that Cisco’s strategy would be “not just disrupting the market but disrupting ourselves.”
The company’s Nexus 3000 and Nexus 9000 switches — foundations of Cisco’s major virtualization play, the Application Centric Infrastructure (ACI) — saw sales gains of 350 percent last quarter from year prior. The company’s Application Policy Infrastructure Controller (APIC) network controller for ACI now has 300 customers, according to Chambers.
Though Cisco executives have previously downplayed the competition from VMware, describing NSX as complimentary to ACI, Chambers drew clear battle lines Wednesday.
“VMware is a competitor. We’re going to beat them as a competitor,” Chambers said, adding jokingly: “I wish I was a better person but I’m not.”
Chambers also dismissed the threat from white box networking, which allows software network controllers to run on generic hardware, saying that the networking giant’s obsession with security gave it a definitive edge.
“This is where we’re just going to — I can’t say ‘crush’ — yeah I can, it’s just white-label — crush the white label people,” he said.
Analysts have for years expected Chambers, who is 65, to announce his retirement. After attributing his enthusiasm on the earnings call to a four mile run he’d taken earlier Wednesday, Chambers dismissed an analyst’s question about succession planning, saying the company had nothing to announce.
Cisco stock was up as much as 6 percent in after hour trading Wednesday.