Cisco posts revenue gains, vows to beat VMware's network software

Sales of Cisco's key products for software-defined networking are growing fast, the company says

Cisco Systems posted quarterly revenue and profit gains that included growth for its software-defined networking products, and Chairman and CEO, John Chambers, used the occasion to lay down the gauntlet to SDN rival VMware.

The company's revenue hit $11.9 billion in the fiscal quarter ended January 24, up 7 per cent from a year earlier. SDN, a new market that might imperil Cisco's traditional network hardware business, was a strong point: Sales of the company's recently introduced Nexus 3000 and 9000 datacentre switches, key to its SDN architecture, grew 350 per cent.

Cisco claimed 1700 total customers for its SDN architecture, called ACI (Application Centric Infrastructure), up from 970 the previous quarter.

On a conference call to discuss the results, Chambers challenged VMware, which sells its NSX software as an alternative to traditional networks.

"We view them as a competitor. We are going to beat them as a competitor. And we will beat them and have fun doing it. I wish I was a better person, but I'm not," Chambers said.

He distinguished VMware from EMC, Cisco's other partner in the VCE all-in-one systems alliance, saying Cisco's relationship with EMC is still strong. Cisco sold most of its share of VCE last year but still contributes server and network components for the venture's popular Vblock platforms.

Chambers also said Cisco is beating so-called "white box" networking vendors, who make inexpensive, generic switches that can be used in some kinds of SDN deployments. Cisco pushes the opposite approach of end-to-end architectures including hardware, software, security and other components, which it says enterprises are using to transform their operations and cut costs.

"Customers will pay probably three to five times as much for a business outcome than they will for a standalone switch or a standalone router," Chambers said.

Cisco's profit also grew during the quarter, rising to $US2.4 billion or $US0.46 per share, from $US1.4 billion or $US0.27 per share a year earlier.

The company's Meraki division, which sells cloud-managed wired and wireless networks and device management, was a standout in the quarter, with revenue doubling year over year.

In the current quarter, Cisco expects revenue to grow by 3.5 per cent from a year earlier. But it doesn't expect much relief in emerging markets or in sales to service providers, two areas where results have been lagging. Service providers' capital spending will stay slow throughout the year and sales in emerging markets are unlikely to rebound in the next few quarters, Chambers said.

Cisco's sales in China, a particularly weak spot where the company has faced allegations around cyberespionage, fell 19 percent.

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