Sign up for our newsletter
Leadership / Finance and procurement

Cisco Anticipates 11% Contraction – Paints a Picture of Silver Linings

Cisco said it anticipates revenues to shrink up to 11.5 percent in 2020.

The comments came as the networking giant reported its fiscal Q3 revenues late Wednesday — which fell eight percent to $12 billion during the quarter.

But executives say they expect to see sustained investment across education, pharmaceuticals and telehealth in the wake of the COVID-19 outbreak.

“COVID-19 did have an impact on our financial results and business operations this quarter, especially in our supply chain where we saw manufacturing challenges and component constraints,” CEO Chuck Robbins told analysts on the call, whilst emphasising Cisco’s resilience and solid cash flow.

White papers from our partners

A sustained programme over the past two years to modernise both its infrastructure and portfolio paid off, he noted, saying that Cisco was running its Webex platform at “three times the capacity we were running at in February to manage the dramatic increase in usage growth.”

Video conferencing platform Webex had “well over” 500 million meeting participants, generating 25 billion meeting minutes in April, the CEO said, saying COVID-19-driven contraction has “highlighted the importance of having highly resilient, globally scalable infrastructure technologies to keep the world running and this is what we build.”

Cisco Earnings: What’s the Outlook for IT Spending?

Yet with customers prioritising cash retention above most else and the initial wave of WFH-software/infrastructure updating already in the bank, what’s the outlook for the rest of the year, or further ahead?

Cisco’s crystal ball is arguably no clearer than anyone else’s, but analysts were keen to get insight from customer conversations and in a pleasingly frank call Cisco’s CEO and CFO did their best to oblige.

Needless to say, the picture they painted was one of silver linings, particularly for certain industry verticals in which they see structural, ongoing shifts that will require ongoing IT investment as the world changes.

As CEO Chuck Robbins put it: “I’ve had a lot of customers… who realised during this pandemic that that they have a fair amount of technical debt and they have a lot of aged equipment….

“Many of them have said this is a wakeup call and this is going to actually give us air cover to talk to our senior leadership team about upgrading and building out a more robust modernised infrastructure.”

Verticals that Will Invest

As CEO Chuck Robbins noted: “As one of the heads of one of the biggest [education providers] in the United States told me, they used anything and everything they could to get students online back in March and now they need to go step back and actually build the real robust long-term architecture that they need and we’re working with them to do that.

“I think healthcare is one that they’re going to make investments. I think telehealth is here finally and I think that’s going to change forever… You got the hospitality, the leisure, the travel that are going to struggle, which is one of the big reasons we wanted to make sure we got our financing program out there — candidly is if they need to make investments during this time, we want to help them do that. Pharmaceuticals and the drug manufacturers are working to beef up their infrastructure for all the research, building up their cyber infrastructure for obvious reasons.”

See also: What Recent Earnings Tell Us About the Tech Sector’s Outlook

 
This article is from the CBROnline archive: some formatting and images may not be present.

CBR Staff Writer

CBR Online legacy content.