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Cisco sees slowdown in large network deals as stock markets wobble

Erstwhile customers are putting large networking deals on hold in an uncertain financial climate, claims Cisco CEO Chuck Robbins

Cisco claimed the recent turbulence on the financial markets gave larger customers pause for thought before making purchasing decisions.

There were repeated plunges across the world’s major stock markets in the first few weeks of 2016 amid talk of a financial crisis gathering.

“When there’s uncertainty in the market, enterprise customers just basically say, ‘Hey, look, let’s wait, let’s see what’s going to happen,’” explained Cisco CEO Chuck Robbins on an analyst call at the close of Cisco’s second fiscal quarter.

“They may say let’s wait a week, they may say let’s wait a couple of weeks. But when you’re in the last three weeks of your quarter, those kinds of decisions have an impact.

“The campus refresh opportunities that have been actually pretty consistent for us over the last few quarters, we saw customers say, ‘Hey, our infrastructure is working, so we’re going to just hold on that for some period of time and let’s see where things go.’”

Second quarter revenues at IT industry bellwether Cisco were flat year-on-year at $11.9bn (£8.22bn), including the customer premise equipment portion of its service provider video business that it sold in November 2015, but grew 2% on the quarter the year before, excluding that figure.

Net profit, meanwhile, rose by a third compared to this time the year before, hitting $3.9bn. As a result, Cisco CFO Kelly Kramer declared a 24%, or five cent, increase in Cisco’s dividend.

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Plans paying off, says CEO

Robbins said that, since taking the CEO role from John Chambers six months ago, he had focused largely on accelerating Cisco’s “innovation engine” and “portfolio transformation”, and said this was now paying off.

The company's software-defined Application Centric Infrastructure (ACI) datacentre platform performed particularly well, he said, growing to a $2bn run rate business.

Meanwhile security, said Robbins, remained a critical priority – Cisco is busily migrating its security model from a hardware to a software-as-a-service business, and this unit saw deferred revenue growth of 26% during the quarter.

Its cloud SaaS lines, notably WebEx, Meraki Cloud Networking and security also saw double-digit growth in Q2, with more of Cisco’s portfolio being delivered in hybrid on-premise and cloud-based models.

Robbins also elaborated a little on Cisco’s purchase of internet of things (IoT) specialist Jasper, and said the supplier wanted to play a strategic role in the IoT.

“We will enable our customers to monetise the data from the billions of sensors and connections with the security, speed and reliability they have come to expect from Cisco,” he said.

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