Cisco Q4 2012 Earnings: Data Center Boom, TelePresence Bust
Cisco Systems‘ (NASDAQ: CSCO) Q4 2012 earnings, announced yesterday, confirmed booming data center sales but revealed serious weakness in the TelePresence (high definition video conferencing) market. The VAR Guy is starting to wonder if big, expensive TelePresence conference rooms are a passing fad, crushed by free, personal video conferencing software like Skype. Can Cisco’s Jabber software help the company to regain some collaboration momentum? Here’s the update.
First, let’s start with the good news from Cisco — and there was plenty of it:
- Q4 net sales were $11.7 billion, up a respectable 4 percent year over year.
- Q4 net income skyrocketed 56 percent to $1.9 billion amid tight cost controls; earnings per share rose 64 percent.
- Cisco’s Q4 cloud revenues grew nearly 100 percent.
- Chambers is cautiously optimistic about the service provider market, where he expects Cisco take share from Juniper.
- It was a record year in terms of revenues and earnings per share for Cisco. Impressive.
- Cisco is sitting on $48.7 billion in cash. Oh my. More acquisitions coming? Safe bet: Yes.
- Data Center revenues grew 42 percent from Q3 and UCS (unified compute system) bookings grew 58 percent vs. Q4 2011. Again, very impressive.
According to Cisco CEO John Chambers:
“The innovation we’re driving and our traction in the data center is truly incredible, as measured on with every scale, revenue growth, market share and customer mind share. Our ability to move first in this market transition to unified compute, storage and networking and deliver on long-term ongoing innovation around unified fabric, unified compute and unified management has helped solidify our position as a leader in the next generation data centers.”
So far, so good. Great stuff.
A Bad Video Connection
Now, one area of bad news: Cisco’s collaboration revenues — mainly involving TelePresence and high-definition video conferencing — dropped 8 percent to $992 million in the most recent quarter. Chambers blamed the decline on a “decrease in TelePresence sales” primarily amid challenges in the public sector, where collaboration revenues dropped almost 30 percent year over year in Europe.
Some pundits think Vidyo — which is rolling out a free, cloud-based video conferencing service — is further pressuring Cisco’s TelePresence sales.
Chambers tried to spin a positive story, noting that the new TX9000 immersive system “gained solid acceptance in the first quarter” and he pointed to SaaS and Cisco’s Jabber software for signs for hope.
“Our Jabber software application that enables instant messaging conferencing, voice and TelePresence video to multiple devices across most major operating systems has gained significant traction, increasing 55 percent in license volume, and Cisco WebEx increased again in this quarter solidly on a global basis,” he said.
But is 55 percent growth for Jabber — a fairly new software application — all that impressive? And can Cisco somehow convince public sector customers to open their wallets wider for six-figure TelePresence systems? The VAR Guy isn’t so sure.
Still, there’s a lot to like about Cisco’s progress in the past year. The company has regained its focus and delivered record annual results. Plus, Chambers is positioning Cisco to dominate software defined data centers. Promising moves. But that TelePresence sales challenge seems like a tall one…