Strategic pacts will spur Cisco growth, says CEO

Chuck Robbins says Apple, Ericsson and Inspur alliances will pay dividends despite warning sales in Q2 will trail expectations

Cisco CEO Chuck Robbins has talked up the vendor's recently formed strategic partnerships with the likes of Apple as key to its growth prospects, despite warning that sales for its current quarter will trail expectations.

Cisco's share price slumped by about six per cent last night as it warned sales will grow at between zero and two per cent year on year in its current quarter – below Wall Street forecasts.

Robbins put this down to lower-than-expected order growth in its last quarter, Q1, which ended on 24 October. This was driven by "uncertainty from macro and currency impacts, primarily outside the US".

Q1 net profit rose by 7.9 per cent year on year to $3bn (£2bn) on revenue that inched up 3.6 per cent to $12.7bn.

Robbins told the FT this morning that big acquisitions in the Dell-EMC mould are not his thing.

However, he did highlight a string of acquisitions (Portcullis, Lancope, ParStream OpenDNS, Pawaa and MaintenanceNet) Cisco either announced or closed in Q1. The period also saw it form strategic partnerships with the likes of Apple and Ericsson, the latter of which it said would boost its sales by $1bn by 2018.

"Partners like Apple, Inspur, and Ericsson see Cisco as the market leader they want to work with to move faster and drive greater value to customers and the market," Robbins said on the Q1 earnings call, a transcript of which can be found here.

"I believe we will see several points of growth from these partnerships over the next few years."

Among the quarter's highlights, Cisco's UCS server business grew 24 per cent, while the vendor claimed its next-generation datacentre switching business now has a $2bn sales run rate.

Secured deferred revenue grew 31 per cent, it added, although some more traditional parts of Cisco business saw declines, with routing shrinking eight per cent.

Breaking it down by geography, Americas grew one per cent, EMEA rose three per cent and APJC bounced nine per cent.

Robbins, who took the helm from John Chambers in July, said he was "more optimistic than ever" about Cisco's future as he reflected on his first quarter in charge.

"Yes, the guidance we just gave for Q2 is lower than what the market had expected, and I don't take that lightly," he said.

"But for me, nothing has changed in how I feel about the business. We are moving incredibly fast and doing all the right things to drive our growth and strategic relevance."