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Cisco pivots strategically but still loses money

Cisco is betting big on intelligent, automated networking, but its revenues are dropping as it makes the strategic shift

Cisco has had a “strong quarter and a transformative year”, according to CEO Chuck Robbins, but the networking supplier is nevertheless continuing to lose money as the strategic changes Robbins is driving take time to bed in.

In the final quarter of its financial year, Cisco made sales of $12.1bn, down 4% year-on-year, and net profit of $2.4bn, down 14% over the same period.

Full-year sales dropped 2% to $48bn, and net profit fell 11% to $9.6bn.

On the traditional analyst conference call, transcribed by Seeking Alpha, Robbins said Cisco was executing well against its changing vision, and reflected on its pivot towards so-called intent-based networking, or IBN – a network that uses machine learning to analyse data and turn intent into automated action.

“We intend to further accelerate our leadership in intent-based networking through the combination of our expertise in network infrastructure, AppDynamics visibility into applications and the Talos automation capabilities,” said Robbins.

“The network has never been more critical to business success and we’re looking at helping our customers take advantage of the insights in intelligence that are only accessible through our highly differentiated platforms,” he added.

The underlying shifts in the sector, including the transition to software-based models of networking, were reflected in Cisco’s changing sales mix, with 31% of total revenues now recurring, up 4%, and subscription revenues up 18% to over 50% of its software revenues.

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Meanwhile, sales of traditional switches continued to fall, although Robbins attributed this chiefly to a slight drop off when Cisco launched its Network Intuitive IBN platform in June, as customers took some time to evaluate the new model, and claimed this was now creeping up.

“We always knew when we attempted to introduce a subscription model on a switching product … that we had to bring innovation that had such a high return for our customers that they would not have a problem buying it in that model, and that’s what we’ve seen,” said Robbins.

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