When looking beyond Cisco’s downward guidance and layoff stories, comes big home towards software side
Global networking giant, Cisco set a number of records of substance for its 2013 Q4 earnings. The company’s revenues ($12.4 billion), non-GAAP operating income, net income and earnings per share led the way, along with $4 billion of cash flow, of which $2.1 billion was returned to shareholders.
The networking company exceeded the midpoint of its guidance, grew its wireless business and its data center business, saw topline growth in the enterprise in the U.S. the company has also acquired SourceFire, an information security provider, and the seventh acquisition this calendar year. But then it began to rain. Cisco provided a more unpleasant Q1 guidance, announced that it would lay off 4,000 employees.
Market analysts have attributed the Cisco’s downfall to an inconsistent recovery, a depressed global GDP, and the lack of predictability in Asia and in emerging markets, particularly in Japan, and China.
Yes it is true that the company’s data center business grew by 43% year-over-year. Cisco’s converged architecture grew into a $2 billion business in five years.
Today the company has Unified Computing System (UCS), an architecture that combines networking, storage, servers, virtualization and unified management, and pits Cisco more squarely against HP, IBM and Dell.
And today Cisco’s server business is on the low side, especially when compared to what the other payers are doing, but the company’s market share in blade servers has climbed to number two, according to IDC — a number Chambers gladly squawked about; but IDC also reports that blade servers account for only 17.7% of total server revenue.
Cisco had garnered the number one spot in cloud infrastructure market share, overtaking HP and IBM in calendar Q1 2013 with more than 15% share, representing over $1 billion for the quarter.
Although Cisco’s wireless business is already an amalgamation of past acquisitions, one of them (Linksys) the company later sold off, Cisco acquired wireless manufacturer Meraki late last year for $1.2 billion.
In the data center, everything Cisco has been building is software-defined and more easily programmable. An overarching theme to nearly all data center technology, is Cisco ONE, or Open Network Environment, an architecture for programming the network. Cisco has tossed its weight behind everything from OpenFlow (a software-defined network standard), to OpenStack (standards for creating private and public clouds), to Open Daylight (another software-defined network standards effort).
And quite aptly to its current situation, it seems Cisco doesn’t look up so much to be writing network controllers, but creating network applications and more solutions in the coming years.