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Cisco leadership hits the ground running in strong fourth quarter

New CEO Chuck Robbins closes out the fourth quarter on a high note and speaks of a renewed energy at the network supplier

Chuck Robbins has rallied Cisco’s troops to his banner, speaking of an “infectious energy” emerging at the company over the past three months as he led his first conference call as CEO.

“We have made strong moves around the four focus areas that I laid out: accelerating what’s working and changing what’s not; simplifying our business; driving our operational rigour; and investing in our talent and our culture,” he said.

Robbins said he saw a huge market opportunity ahead as enterprises and governments use digital to drive growth and operational efficiency, and the network plays an ever-more important role in enabling digital strategies.

Cisco’s headline stats were all moving in the right direction, with Q4 revenues hitting $12.8bn and full-year revenues of $49.2bn, both up 4% year-on-year.

Net income in the fourth quarter was up 3.2% compared with Q4 2014 to $2.3bn. Full-year net income was up 14.4% on 2014 to reach $9bn.

In the fourth quarter, Cisco earned 59 cents per share – 3 cents ahead of analyst expectations.

CFO Kelly Kramer said that globally, Cisco saw its strongest growth in the Americas, where sales grew by 7%. EMEA declined by 1% and APJC by 1%. Total emerging markets were down 2%, with the BRIC economies, plus Mexico, down 7%. This was largely because of macro and geopolitical issues, said Robbins, who noted that if Cisco had accounted for its Russian business separately, EMEA revenues would actually have grown.

Cisco saw a return to positive growth of 2% on the service provider side, while its commercial business grew by 11%. Enterprise was down 1%, and public sector up 4%.

The company’s collaboration business, which it is currently shifting towards more recurring revenue, grew by 14%, with deferred revenue growth topping 20% on its subscription and SaaS businesses.

In security – emerging as a top concern for Cisco’s customers – the supplier continued to push its threat-centric model and claimed it was adding customers more than 15 times faster than Sourcefire was at the time of its acquisition. It also saw strong growth in deferred revenue from security software subscriptions.

The firm's core switching and routing business continued to perform well, with the transition to its Nexus 3000 and 9000 lines, and Application-Centric Infrastructure (ACI) – its SDN portfolio – well advanced and quarterly sales approaching the $500m mark, more than doubling year-on-year. Cisco said 26 out of its 28 biggest customers were now Nexus 9000 customers, 30% of them new in Q4.

Finally, customers continued to embrace the Meraki cloud-based consumption model. Cisco closed out 2015 with a $1bn run rate, compared with $100m when it bought Meraki in 2012.

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