Cisco’s Q3 Earnings Show that Non-Core Products Are Growing
Cisco’s Q3 Earnings Show that Non-Core Products Are Growing by UCStrategies Staff
Cisco Systems, Inc. reports its FY 2013 Q3 earnings, revealing a net profit of $2.5 billion and sales of $12.2 billion. On a GAAP basis, net profit for the first nine months of FY 2013 was $7.7 billion, compared with $6.1 billion in the same period last year.
Cisco says that although its core products, switching and routing technologies, make up the bulk of the revenue, they basically register flat sales. In fact, switch sales dropped by 2 percent. The 14.5 percent increase in quarterly profits and the 5 percent increase in total sales are attributed to the company’s non-core products, which include data center automation gear, video products, and wireless networking equipment. The sales of data center equipment, such as virtualized servers, soared by 77 percent.
“Cisco is executing at a very high level in a slow but steady economic environment,” said Cisco CEO John Chambers. “We are especially pleased with our ninth consecutive record revenue quarter. We are starting to see some good signs in the US and other parts of the world, which are encouraging.”
“We have always believed that the Internet will revolutionize the way we work, live, play, and learn. This has never been truer than it is today, with cloud, mobility and video all coming together to deliver the Internet of Everything and unprecedented new opportunities for businesses and consumers,” he added.
Revenue from non-core products hardly comprises half of the company’s total earnings. However, such products show the strongest potential for growth. They are also significantly less pricey. And compared to the fierce competition in selling switches and routers, the market for non-core products is less competitive. Moreover, analysts indicate that Cisco’s competitors—Brocade, Juniper Networks, and Hewlett-Packard—are selling quality switches at considerably lower prices than those offered by Cisco.
Channelnomics’ Larry Walsh writes that Cisco has stood up for its routing and switching business. But there are indications that it is under pressure. Walsh also describes the challenge for Cisco to rapidly scale its non-core products, because its channel is largely based on core networking.
The Asia-Pacific region is the main contributor to Cisco’s Q3 2013 revenue, throwing in $1.95 billion in revenue compared to $1.86 billion in Q2. In the Americas, Cisco’s FY 2013 Q3 revenue has slightly dropped to $7.12 billion from $7.13 billion in Q2. (KOM) Link. Link. Link.