Partners Still Confident In Cisco Business Despite Wall Street Wallop

Despite Cisco Systems shares tanking 12 percent Thursday following the networking giant's bleak second-quarter outlook, partners say their confidence in Cisco and its enterprise business isn't shaken.

"I'm still thinking that they are one of the best companies that we deal with," said Steven Robb, president of the Solution Group at LaSalle Solutions, a Rosemont, Ill.-based Cisco Gold partner. "We sell into the enterprise and what Cisco would call 'commercial select,' and in those areas we are seeing growth."

Cisco Wednesday rattled Wall Street by saying it expects revenue for its current fiscal quarter to be down between 8 percent and 10 percent year over year. Cisco also revealed mixed results for its first fiscal quarter, attributing the slowdown to weakness in emerging markets and the service provider segment.

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Cisco shares, as a result, took a nosedive Thursday, with financial analyst firms S&P Capital IQ and Deutsche Bank downgrading Cisco stock from "Buy" to "Hold," according to reports. Goldman Sachs, meanwhile, lowered its Cisco price target from $30 to $25, citing "reduced confidence in the near-term trajectory."

Cisco partners, however, who center the bulk of their businesses around the enterprise and commercial markets, told CRN they aren't discouraged by Cisco's financial tailspin this week.

"[Cisco CEO John] Chambers is about as conservative as it gets when he talks about his numbers and his forecast," said LaSalle Solutions' Robb. "In the IT market, I don't know if there is another CEO who has lasted as long as John Chambers. And I think the reason why is because he is very conservative, he tries to forecast things up front, and he's just honest."

Robb said LaSalle Solutions, a Cisco partner since 1996, has seen its Cisco business shoot up between 20 percent and 25 percent this year compared with last year. A lot of that growth, he said, came from sales of Cisco's Unified Computing System (UCS) converged infrastructure offering, along with its telepresence and collaboration products.

In 2014, Robb said LaSalle expects to see at least as much growth in its Cisco business as it did in 2013, if not more.

"They are one of the key partners inside of LaSalle's portfolio that gives us the ability to win," Robb told CRN.

Sudhir Verma, chief services officer at Force3, a Crofton, Md.-based solution provider, also expressed confidence in Cisco but emphasized the importance of the company evolving to meet new customer challenges around security, mobility and software-defined networking.

"Overall, I still believe in the Cisco brand," Verma said. "From a reseller perspective, our customers are changing, their challenges are changing, and the solutions they need are changing. If Cisco doesn't change with it and continue to provide us with solutions to address our customers' challenges, it becomes difficult for a partner to continue to stand behind that brand."

Verma said Force3's Cisco business grew in 2013, also propelled by strong UCS and collaboration sales, but declined to give specific numbers.

He also praised Cisco for its recent acquisitions, including its $2.7 billion buy of security provider Sourcefire, and said he is anxious to start seeing products emerge from those investments.

"We truly believe that their future is bright," Verma said. "They just have to keep at it."

NEXT: Cisco's Enterprise Business Results

Harry Zarek, CEO and founder of Compugen, a Richmond Hill, Ontario, solution provider and No. 58 on CRN's 2013 Solution Provider 500 list, also said his confidence in Cisco remains intact.

"Clearly, we don't have visibility on their global business, but in our market there is strong, continuing interest in [Cisco's] business and we see no slowdown in customer acquisitions," Zarek told CRN in an email. "We are confident in their portfolio."

Zarek said Compugen's Cisco business grew in the "high single digits" in 2013 and he expects similar growth next year.

While Cisco's emerging markets and service provider segments were down 12 percent and 13 percent, respectively, in the San Jose, Calif.-based company's first fiscal quarter, its enterprise business, and especially its data center segment, grew.

Cisco said its enterprise business was up 2 percent year over year, with its U.S. enterprise business, specifically, growing in the "high single digits."

Cisco's data center segment represented its fastest-growing product group, with its first-quarter revenue jumping 44 percent year over year.

PUBLISHED NOV. 14, 2013