Cisco's Q1 was hit by weak US carrier spending and falling emerging market growth, but it still managed a record, and was lifted by good figures in Europe. Total product orders rose 1% yr/yr in FQ1: Americas +2%, EMEA +6%, Asia-Pac/Japan -12%.
"We are pleased with our results and are very comfortable in our strategy to deliver innovative solutions which enable the next generation of IT and the Internet of Everything. This was our strongest Q1 ever in terms of revenue, non-GAAP operating income, and non-GAAP EPS," says Cisco chairman and CEO John Chambers. "We continue to make progress towards becoming the #1 IT company in the world. We are still in a tough environment, but seeing encouraging trends as cities, businesses, governments and schools are becoming more digitised."
“EMEA was a highlight with growth of 6%. We saw very strong performance in the UK, up 20% and strength in Germany, up 6%. Southern Europe grew approximately 20%. We saw some stabilisation in the emerging countries within an EMEA with growth of 2% in the emerging segment. Based on the role we play in the digitisation of countries and companies including our ability to bring innovation in job creation, we’re more positive on the future business in Europe than perhaps some of our peers are.”
Cisco saw dramatically reduced spend at several large US service providers. And cloud is changing a lot of its business: “We are frequently asked what Cisco is doing differently in the crowded cloud markets. Simply put, we see the same problem in cloud that we saw 20 years ago in networking, where numerous networks operated on different technologies that didn't talk to one another. As we blow down the silos with Ethernet, we made the Internet pervasive. We are running the same play in cloud as only we can, unifying private, public and hybrid clouds.”
Customers want to seamlessly move their workloads between cloud with a common goal of policy and security. They need scale, feed and reliability and they care about data sovereignty and openness, he says. “We will place this market as a solutions play, meeting the network requirements of enterprise class applications and providing the platform to deliver Cisco's growing portfolio of software-as-a-service offers. This would drive our strategic role with customers and over time our recurring revenue.”
Security is the number one issue facing many customers. “Security revenues grew in this quarter by 25%. In this quarter, we combined our security products even more closely with the Sourcefire products and delivered a highly anticipated Cisco ASA with Firepower services, which combined Cisco’s ASA firewall with Sourcefire into one platform. Customer receptivity has been very positive. Our innovation and security is very strong. Security continues to be our customers’ number one business priority at the CIO level, but perhaps even more important at the CEO level. And we are doing very well in this market. Nearly every initiative we have at Cisco has security as a key component and we are committed to becoming the number one security company.”
“Service provider is the big challenge, let me be very explicit, that’s due to two to three US service providers, who have dramatically slowed the order rates and I mean dramatically slowed the order rates with us. And that's an implication also I think of some of the -- what you're seeing in terms of net neutrality, where in my opinion it would be a very disappointing in result if we moved back to regulation of the Internet like we did voice many decades ago,” he concludes.
