In an apparent effort to demonstrate to analysts that Cisco is not losing the web-scale data center market to white-box or Taiwanese design manufacturers, its new CEO Chuck Robbins revealed that the company recently designed and delivered a custom high-end networking platform for one of the “cloud titans.”
On his first quarterly earnings call as Cisco CEO Wednesday, Robbins said orders from web-scale data center operators were growing at a “significant” pace. “With our ability to build out scalable solutions with consideration to their unique needs I think we’re reasonably well positioned,” he said, answering a question about Cisco’s web-scale play from one of the analysts on the call.
Like other big hardware vendors, the HPs and Dells of the world, Cisco is fighting to keep its business with customers that build and operate some of the world’s largest data centers. Also referred to as “web-scale” data center operators, companies like Google, Facebook, and Amazon have been designing their own hardware and going directly to manufacturers in Asia with massive orders of stripped-down boxes without extra features the “incumbent” vendors have been including in their products to increase their value.
Google is known to have used this approach to sourcing networking hardware for years. Facebook has been transitioning to switches designed in-house recently.
New companies have been formed to respond to this trend, companies like Arista Networks, a switch vendor that lists Facebook as one of its customers, and Cumulus Networks, which has designed a Linux-based network operating system for open bare-metal switches.
Cisco’s incumbent competitors have responded too. HP announced plans to ship commodity switches with Cumulus software earlier this year, for example. HP also recently struck a partnership with Arista. Dell and Juniper have both cooked up switches that come with software other than their own.
The web-scale market isn’t insignificant, but it is fairly small compared to the enterprise market that drives the bulk of the data center hardware revenue for Cisco and its rivals. Vendors that cater to the web-scale audience are attempting to expand into the enterprise market, and interest in the enterprise is rising, but the take-up of this entirely new approach to hardware sourcing has been slow.
Cisco reported $12.8 billion in revenue for the fourth quarter of fiscal 2015 – up 4 percent year over year. Its earnings per share for the quarter were $0.45.
The company’s switching business segment, the biggest one in terms of revenue, contributed about 30 percent of total revenue. Its data center business segment, which sells its Unified Computing System servers and converged infrastructure systems, contributed 7 percent of total revenue.
Robbins was upbeat about the company’s future, saying he was focused on “accelerating what’s working and changing what’s not, simplifying our business, driving operational rigor, and investing in our talent and our culture. Cisco’s best years are ahead of us,” he said.