It’s not news that these are unprecedented times. No one has seen anything like COVID-19 — or the global response to the virus – before. Many people worry about how this situation will evolve and how it will affect economies, careers, and personal bottom lines. The long-term economic fallout after the crisis passes is unknown. It’s possible it will be bad and last a couple of years. It may be shorter. There’s no way to tell.
The tightening of the purse strings has led tech prognosticator IDC to lower its 2020 guess forecast for the Ethernet switch and wireless LAN markets. The research firm expects the WLAN market to grow less than 1% from 2019, while the switch market will shrink 0.7%. The revised numbers represent a 3.7% point drop from IDC’s earlier 2020 forecast for Ethernet switches and a 4.8% point decline for WLAN revenue. In dollar terms, IDC says the switch market will reach $28.5 billion this year while WLAN revenue will be $6.2 billion.
To prove IDC’s point, Cisco (CSCO) just announced its ’20Q4 earnings report and it was not pretty. During the fourth fiscal quarter that ended June 30, the tech giant‘s product revenue fell 13% year over year to $8.83 billion. After the presser, CSCO slid by more than 11% – the worst day since February 2011.
As an answer to declining revenue Cisco CEO Chuck Robbins announced layoffs a restructuring plan was underway:
Over the next few quarters, we will be taking out over $1 billion on an annualized basis to reduce our cost structure.
The San Jose, CA-based company Cisco, which employees 75,000 people, worldwide, did not say how many employees would be laid off restructured going forward. Cisco has been laying off employees over the past few quarters. CEO Robbins said on the earnings call, that the COVID-19 pandemic has forced the company to “re-examine” its entire portfolio and nothing is off the table.
In theory, Cisco is using the restructuring to accelerate its R&D to focus on delivering everything it can as a service as it transitions to generating more of its revenues from software rather than hardware. In the last quarter, FierceTelecom reports that Cisco now generates half its revenue from software and services.
CRN reports that Cisco‘s infrastructure segment, which includes the core switching and routing businesses as well as wireless and data center products, continued its double-digit decline, falling 16% during the quarter to $6.62 billion. Overall, this segment dropped 10% for the full year.
Revenue was down across all customer and geographic segments. In terms of customer segments, Cisco saw revenue decline in all segments:
Public sector fell by 1%,- Service provider down 5%.
- Enterprise declined 7%,
- Commercial tumbled 23%,
Regional sales also fell:
- EMEA fell by 6%,
- APJC was down 7%, and
- Americas, declined by 12%,
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Besides COVID, other factors have stopped tech spending including technology shifts into 5G cellular networks, 400-gigabit Ethernet, WiFi 6. The fact is that Cisco wants to transition the majority of its portfolio to an as-a-service consumption model. Cloud expansion could support Cisco’s business. BUT– Cisco has never been a major player in the cloud. Their go to cloud story proves it
In 2014, Cisco’s first cloud strategy, InterCloud based in OpenStack was abandoned in 2016. Cisco’s next cloud strategy was to become the Switzerland of the cloud. This strategy was to work across multiple public and private cloud environments – to be a neutral player. It focused on: management, security, analytics, and being Cisco – advanced networking. This Cisco Cloud phase has morphed again.
Cisco’s current approach to multi-cloud is network-centric and its centerpiece is an architecture called Application Centric Infrastructure (ACI) – which formerly only ran on Nexus devices. ACI focuses on policy, management, and operations for applications deployed across cloud environments.
I’m sooo confused about the Cisco cloud story, are you?
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Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.
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