Cisco Beats Analysts' Estimates As New CEO Robbins Reports Record Revenue

Chuck Robbins held his first earnings call as Cisco's new CEO on Wednesday, reporting record revenue of $12.8 billion for the fourth quarter of its fiscal year 2015 with a solid uptick in its commercial business.

"I'm stepping into the CEO role at an incredibly exciting time for the company," said Robbins. "John's [Chambers] vision and leadership have set Cisco up for the future that I believe will be even better than our past."

Cisco exceeded analysts' $12.6 billion revenue estimates, reporting sales of $12.8 billion and per-share profit of 59 cents for the quarter ended July 26, up nearly 4 percent year over year. Overall sales for fiscal year 2015 reached $49.2 billion, which also represented an increase of 4 percent from fiscal year 2014.

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Cisco's global commercial business grew 11 percent, while its U.S. commercial business increasing 19 percent -- representing 23 consecutive positive-growth quarters, said Robbins.

"The key is that we have really shifted both our solutions and our technology as well as our selling motion and services capability to be much more tightly aligned with how the technologies align with our customers' business issues," said Robbins. "Meraki has clearly been a big success at almost a $1 billion run rate. … We're seeing an expansion into manage cloud switches as well as security."

Partners were excited to see more traction coming from the commercial space.

"From a VAR side, from a services side, those are ideal customers that have services needs that can be filled quickly and easily without a lot of hang time," said Matt Duncan, director of GDT Labs at General Datatech, a Cisco Gold partner ranked No. 45 on CRN's 2015 Solution Provider 500.

Product sales reached $9.9 billion for the quarter, while service revenues hit $2.9 billion -- both showed a 4 percent growth rate from the prior year's quarter. Cisco's deferred revenues rose to $15.2 billion for the quarter, compared with $14.1 billion the year before.

"I'm particularly pleased with the strong growth of deferred revenue, which shows we are very effectively driving our business to a more predictable software-based business model," said Robbins.

The San Jose, Calif.-based networking giant has been pushing security into the forefront in 2015 and was able to capture $464 million for the quarter, up 4 percent from last year.

"We're quickly building a substantial software subscription business in our security portfolio and you see that in the 26 percent growth of deferred revenue in Q4 security," said Robbins.

For its entire fiscal year 2015, Cisco generated around $1.75 billion in security sales up 12 percent from fiscal year 2014.

"I'm very bullish with where we are in our security portfolio," said Robbins. "Software is now 47 percent of the security portfolio. … We're clearly going to have to continue to expand our offerings for the customers and we'll do that through a combination of internal R&D, acquisitions where needed, partnerships where they make sense, co-innovation where it makes sense, so we'll be looking at all alternatives."

Partners said they are expecting Cisco to make a "large" acquisition before the end of the calendar year.

"One of the biggest things is their continued focus on security and the constant conversation around acquisitions," said Ethan Simmons, vice president, East, for Lumenate, a Cisco partner based in Dallas. "Chuck said they're not going to be afraid to make acquisitions in the security space."

The networking giant saw a 2 percent increase in switching with $3.72 billion in sales, while routing rose 3 percent year over year, to nearly $2 billion.

The company's global enterprise business dropped 1 percent, while the public sector grew 4 percent. Its sales in the Americas increased 7 percent, to $7.8 billion, although its EMEA and APJC sales both declined 1 percent.

Cisco's wireless sales rose 7 percent, to $715 million, and collaboration revenues jumped 14 percent, to $1.09 billion. In the data center, which contains Cisco's UCS servers, the company increased sales 14 percent, to $880 million.

Partners viewed the quarter's earnings as a success, but nothing spectacular.

"The Cisco numbers weren't a blowout or anything like that, but they showed growth," said Lumenate's Simmons. "Usually, Cisco is pretty conservative ... in their estimates going forward -- it's unusual for them to be optimistic about it -- so I don't know if that's the new world with Chuck."

The company is expecting 2 percent to 4 percent growth year over year for its first quarter of fiscal year 2016 and book per-share profit of 55 cents to 57 cents.

"Over the last 90 days, we've seen an infectious energy emerge at Cisco," said Robbins. "We will continue to move quickly."

Cisco shares rose more than 3 percent in after-hours trading after the results were announced.

PUBLISHED AUG. 12, 2015