Cisco Systems delivered a weaker-than-expected earnings forecast on May 17, but a bright spot involved the networking giant's security business performance.
Indeed, Cisco's security revenues grew 9 percent in Q3 2017, and deferred revenue jumped 39 percent during the period, the company said.
"We continue to lead in network security," Cisco CEO Chuck Robbins said during an earnings call. Among the potential proof points: Cisco's next-generation firewall portfolio grew 49 percent with 6,000 new customers in the quarter, bringing our total customer base to over 73,000, Robbins indicated.
Also, Cisco's advanced threat portfolio revenue grew more than 30% as the company added 6,600 new customers, bringing the total number of AMP customers to over 35,000, Robbins said.
As organizations add "billions of new connections," Cisco believes customers will need security embedded at the network layer "because you're going to have to begin to secure the infrastructure the minute these packets hit the wire," Robbins asserted. "So what they're looking for is -- they are looking for an end-to-end architecture now for dealing with security."
Cisco: Product Sales vs. Recurring Revenues
Still, Cisco's security momentum wasn't enough to offset investor concerns about the networking company's overall business. Cisco's total Q3 revenues were $11.9 billion, down about 1 percent from Q3 last year. Also, the company forecast a revenue dip of 4 percent to 6 percent in Q4 2017 vs. Q4 2016.
Amid that weakness, Cisco confirmed plans to cut 1,100 employees -- in addition to the 5,500 cuts the company announced in August 2016.
The bearish forecast pressured Cisco's stock in after-hours trading. Among the areas of concern: Sales to service providers, and the continued shift from traditional hardware and software sale to as-a-service models.
Cisco's recurring revenues are growing, but perhaps not as quickly as Wall Street would like. Roughly 90 percent of Cisco's services revenue is recurring, but only 10 percent of the company's product revenues are now recurring, though that's up from 6 percent recurring product revenues about six quarters ago, Robbins estimated.
Cisco Security and Partner Momentum
Still, security remains a bright spot for Cisco and its partners. Channel Chief Wendy Bahr has spent more than a year telling partners for focus on security, security and more security.
Moreover, the Cisco Umbrella team (formerly OpenDNS) continues to win business with MSPs.
