Cisco FY 3Q15 Earnings Call Notes

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Bye Bye John Chambers

“As I reflect back, I’m extremely honored and proud to have led Cisco for the last 20-plus years. We set out to change the way the world works, lives, learns, and plays. And while many thought this was a very ambitious and not unobtainable goal, we absolutely have achieved that goal. We have delivered incredible innovation and have disrupted markets and at times ourselves. We have seen many competitors come and go. We’ve had our setbacks but always come back even stronger, something almost no other technology company has done. We have remained incredibly focused on delivering for our shareholders. We are a cash and profit machine and have maintained our margins over time by delivering sustainable differentiation through integrated architectures based on intelligent networks.”

Challenges remain in service provider and emerging markets

“The volatility in service provider and emerging markets we have discussed in prior quarters continues. Our service provider business remains challenged both globally and in the U.S.’

Verizon testing Cisco’s next gen systems

“During the quarter, Verizon announced it is moving to a next-generation 100-gig Metro network in the U.S. and that it will test and deploy Cisco networking convergence systems, the NCS. No one thought we were even in this game. Our ability to win the deal was entirely driven by our new generation in terms of engineering organization, our ability to deliver integrated architectures, our agility with engineering to realign resources quickly, the speed of our innovation, and our unique ability to partner with our customer to shape their future and the future of the industry.”

Cisco and Microsoft partnering

“During the quarter we announced Cisco and Microsoft will integrate Cisco cloud innovations with Microsoft Azure to help service providers more quickly and cost efficiently launch new applications. We will also extend the enterprise-class security and services and customer private clouds to Microsoft Azure with Cisco Cloud Services Router, the 1000V”

We saw the internet early on and then the internet of things

“In our 1997 Annual Report, when it was not obvious that the Internet would take off, we boldly declared that an Internet revolution would alter the fortune of companies, countries, and people, and we saw it come to life. A number of years ago we started talking about the next phase of the Internet, the Internet of Everything. That will be much bigger than the last, and it will require everything to become digital. At the time, almost no one understood what we saw. Today, it’s everyone’s idea. The conversations we are having today with our customers are so similar in many ways to those that we had 20 years ago. We have always been the example and saw the transitions early. And when others start noticing them, they are well underway.”

The Verizon deal was important because we won in an area that we’ve not historically been strong

“When you win a Verizon deal, people didn’t get what that was. That was optical in an area that we’ve traditionally not been strong in. Because we organized our sales engine different, our service engines different, and our R&D engine different, we understood what the customer wanted. We understood on the fly how we’d realign resources. We understood how you’re going to have a win rate that is much higher than ever before in markets that we haven’t traditionally been as strong. So all those, Simona, translate into revenue growth and profit growth.”

There are 10 major players in data centers

“If you look at where we are, and let’s call it the massively scalable data centers, the top 10, our role in that is evolving, and candidly we’re starting to move much faster. If you watch our ability to bring new products to market, you’re going to see us have all 10 of the major players as key customers shortly. And up to recently, as you know, we were missing largely in one of those.”

Security is a fragmented market

“security is the ideal market for us. It basically is made up of hundreds of fragmented players. We’re the largest volume player at only 7.5% of the market. And you know our view, we don’t enter markets where we don’t have a good chance of getting to 40% market share with sustainable differentiation.’

We can do with 20 people what used to take thousands

“what excites me the most is what we’ve done on culture and how we’ve built an engine platform innovation. And if you watch the innovation we’re talking about in many of these areas, what used to take thousands of people, Pankaj does with 20. We do the new mobility capability with data combining Wi-Fi with 3G and 4G in a way with 18 people in eight months. You make moves in security the same way. You bring Spark to life with business messaging with 200 people. We can now rival the best startups there are in the world and out execute them because they can build off of that capability.”