Cisco Soars on Storage

Networking giant Cisco Systems Inc. (Nasdaq: CSCO) posted a solid set of third-quarter results today, buoyed by strong performance from the vendor's storage operation (See Cisco Reports Q3.)

Cisco's quarterly revenue was $8.9 billion, up 21 percent on the same period last year and above analyst estimates of $8.76 billion.

Speaking on a conference call tonight, Cisco CEO John Chambers highlighted the performance of the vendor's Advanced Technologies division, which includes storage, as one of the main drivers behind the vendor's growth. "Storage led the way with 50 percent growth, followed by unified communications in the mid-30s," he said.

Revenues from the Advanced Technologies group, including the vendor's Scientific Atlanta division were up 36 percent year-over-year to $2.1 billion. Excluding Scientific Atlanta, growth was 24 percent year over year. "Advanced technologies revenues are now becoming larger in their contribution to the top line than routing," said Chambers.

The vendor's earnings per share were 30 cents on net income of $1.9 billion, up from $1.4 billion and 22 cents per share in the year-ago quarter. On a non-GAAP basis, Cisco reported earnings of 34 cents on net income of $2.1 billion, up from $1.8 billion and 29 cents in the same period last year. Analysts had projected earnings of 33 cents.The last few months have seen a lot of activity from Cisco around storage. For example, the vendor recently snapped up file virtualization specialist NeoPath Networks in an attempt to boost its CIFS and NFS stories. (See Cisco Completes Acquisition, Virtually Changed Landscape, and Acopia Plans NeoPath Buyback.)

Cisco also threw its not inconsiderable weight behind the recently announced Fibre Channel over Ethernet specifications, and acquired packet processing startup SpansLogic. (See Ethernet Storage to Morph Again, Vendors Propose FCOE, Cisco to Acquire Spans Logic, and WAN Optimization Gone Wild.)

The firm's CEO revealed little of the vendor's storage product roadmap during today's conference call, confirming only that Cisco is planning "the second wave" of its advanced technologies products.

Cisco also appears to have avoided some of the spending issues that recently dogged other storage vendors, with users apparently unwilling to part with their cash. (See Overland Struggles With 'Softness', Sun Slips on Storage, Isilon: The Honeymoon's Over, and LSI Promises Better.) Chambers explained that sales to U.S. service providers, firms in Western Europe and emerging markets such as Eastern Europe helped the firm dodge this bullet. "In emerging markets, growth year-over-year was 40 percent," he said, adding that Western European growth was in the mid-teens.

Although the U.S. service provider market remained solid during its third quarter, Cisco did not totally avoid some of the problems that recently hit its competition. "The U.S. enterprise market remains relatively sluggish with growth in the mid-single digits," explained Chambers, adding that customers are being conservative in their budgets.In after-hours trading, shares of Cisco fell $1.56 (5.50 percent) to $26.80.

James Rogers, Senior Editor Byte and Switch