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Cisco CEO Chuck Robbins: ‘If We Can Deliver From The Cloud, We Will’

The tech giant is continuing its software and subscriptions push while transitioning the majority of its portfolio to as-a-service models in the midst of soft enterprise and infrastructure revenues.

Cisco Systems is counting on consumption flexibility and a continued focus on software and cloud-based solutions to drive innovation and growth as its infrastructure segment and enterprise revenues struggle to bounce back from the financial impact of the COVID-19 pandemic.

To help smooth the digital transformation journey for customers, the tech giant is building enterprise networking solutions with built-in security, agility and automation that can be consumed as a service, said Cisco Chairman and CEO Chuck Robbins (pictured) on Tuesday during the company’s quarterly call with analysts.

Cisco plans on transitioning the majority of its portfolio to cloud managed offerings that can be delivered as a service, Robbins pledged. “If we can deliver from the cloud, we will. For example, we’re looking at offering SD-WAN plus cloud security as a service, along with other new solutions,” he said.

During Cisco’s second quarter of its fiscal 2021, ended Jan. 23, software subscriptions accounted for 76 percent of its total software revenue. That represented a slight decline sequentially when compared to Q1 2021’s result of 78 percent. Last February, however, Cisco was deriving 72 percent of its software revenue from subscriptions--four points less than Q2 2021’s result.

“The transformation of our business to more software and subscriptions continues to show progress as we achieved $3.6 billion in software revenue,” Robbins said.

[Related: Chuck Robbins: 9 Biggest Remarks On 5G, Edge Computing, Webex And COVID-19 Consequences ]​ 

While enterprise revenue continued to decline, falling by 9 percent during the most recent quarter, Cisco saw an uptick in specific technology segments, including in wireless, Webex and security. The tech giant noted strengthening order growth in its public sector segment, which climbed 10 percent, and its service provider business, which grew 5 percent. Together, commercial, public sector and service provider accounted for nearly three-quarters of its product orders.

Cisco’s services revenue rose 2 percent, while product revenue fell 1 percent year over year.

Cisco’s Infrastructure segment, which includes the core switching and routing businesses as well as wireless and data center products, decreased by 3 percent during the quarter from $6.59 billion last year to $6.39 billion in Q2 2021. The infrastructure segment saw the most impact from COVID-19 as router and server revenue declines pulled the segment down and offset the growth Cisco did see during the quarter in data center switching and wireless, said R. Scott Herren, Cisco’s new CFO who joined the company on Dec. 18.

In fact, Robbins said that Cisco saw a 20 percent bump-up in wireless ordering during the most recent quarter, which was driven in part by new and demanding applications, such as video, that often requires upgraded Wi-Fi infrastructure.

The company’s applications business segment, which includes AppDynamics and Cisco’s videoconferencing and collaboration portfolio, stayed flat year over year at $1.35 billion in revenue in the second quarter of the year. Cisco in December revealed a series of more than 50 Webex innovations and features aimed at boosting meeting productivity, regardless of the end users’ location. Webex is averaging 600 million quarterly users, Robbins said.

Cisco security, a predictably bright spot in the tech giant’s financials, rose 10 percent during the second quarter of 2021 to $822 million, Herren said.

The San Jose, Calif.-based tech giant during the quarter raised its offer to buy networking hardware company Acacia Communications to $4.5 billion from $2.6 billion after inking a new deal. The company also announced plans in December to acquire cloud communications software maker IMImobile for $730 million and Slido, an audience interaction technology specialist that Cisco plans to deeply integrate into Webex, for an undisclosed sum. Cisco expects the IMImobile acquisition to close in the third fiscal quarter of 2021.

For the fiscal second quarter of 2021, Cisco’s revenue stayed relatively flat at $11.96 billion compared to the year-ago quarter. Cisco posted non-GAAP net income of $3.36 billion in Q2 2021.

Cisco beat Wall Street’s revenue expectations of $11.92 billion for the quarter.  

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