Cisco Systems’ (CSCO) Q3 201

posted in: Earnings Call, Notes | 0

Charles Robbins – CEO and Director

Cyber crime can have devastating effects

“Last week’s WannaCry ransomware attack was another example of the devastating impact cybercrime can inflict on individuals, companies and countries around the world. Since Friday’s attack, our Talos cyber threat intelligence team has been working around-the-clock to dissect the WannaCry ransomware, understand its attack patterns and keep our customers protected. It’s important that the tech industry and customers work together to defend against these attacks from cyber criminals.”

What´s driving areas of weakness

“I’m just going to tell you what drove the weakness in these areas so you can assume the other pieces of the business were pretty much as expected. In the Americas, it was primarily the U.S. federal — I mean, there’s so much uncertainty around budgets. The U.S. federal business was a significant driver. Mexico, there has been a lot of uncertainty in Mexico and that was actually down 49% for us year-over-year. So it was — there’s a great deal of uncertainty around the investment landscape there. And then the third element would have been the Service Provider business in the Americas. So those were the things that really drove the orders in the U.S. In Europe, the U.K., the currency issue in the U.K. is real and was very impactful in that business. And then we continue to see pressure in the Middle East relative to oil prices.”

Subcriptions and software business is growing

“We set out 18 months ago to transition the business to one of more software and subscription. At the time, 8 quarters ago, it was $2 billion on our balance sheet. Today, we’ve more than doubled that, up 57% this quarter to $4.4 billion and accelerating.”

Kelly Kramer – CFO and EVP

Price is within range

“when we look at the drivers of our growth margin, price in Q3 actually has been in the same range that it was pretty much last year as well as last quarter in terms of the price index that we’re seeing. So that’s in the same range. Again, it’s high, but it’s in the range. It’s not increasing. I would say in terms of the guidance for Q4, we’re assuming that. We’re also making sure the teams are being very aggressive where they need to be aggressive in areas and then against competitors where we need to be. But overall, the pricing hasn’t changed dramatically besides the normal erosion that we see in churned business lines.”