Cisco Execs on Trump: Cautiously Optimistic

On an earnings call Wednesday, Cisco’s CEO and CFO expressed cautious optimism about the outlook for the company and business economy in general under Donald Trump’s administration.

Following the US Presidential election, most CEOs are “pragmatic” and want to see how the incoming Donald Trump administration shapes up regarding business policy, CEO Chuck Robbins said.

He added, “I think that President-elect Trump appears to be business-oriented and is focused on driving the economy. And anytime the US economy improves seems to be good for us.”

But he added, “I think there’s consternation around the world related to the political environment and a little bit of wait-and-see.”

CFO Kelly Kramer noted that Trump has said he will make a priority, in his first 100 days in office, out of providing incentives for businesses to repatriate foreign funds to the US. Kramer said she is “encouraged” but they “don’t know details.”

Cisco could use the money for stock buybacks, debt service, M&A or strategic investments, and will listen to investors on making decisions, the CFO said.

If recent feelings of optimism about the economy continue, it will “lift all boats,” Kramer said.

As for the earnings: Weak service provider demand kept Cisco revenues down, as the company reported modest 1% year-over-year quarterly growth to $12.4 billion revenue on Wednesday. (See Cisco’s Kanouff: Service Providers Squeezed Between Demand & Revenue.)

Service provider orders declined 12% year-over-year, which “largely” drove overall product order decline of 2% year-over-year, offset by a 7% increase in service revenue, Robbins said on the company earnings call Wednesday market close.

The company is progressing from a product-sales business model to a model that emphasizes recurring revenue, demonstrated by 48% year-over-year growth in product deferred revenue related to recurring software and subscriptions, Robbins said.

Robbins sees that shift as part of a global trend — many companies that now sell products will transition to providing services that generate recurring revenue. (See Cisco’s Robbins: With IoT & Cloud, Services Beat Products.)

In August, Cisco laid off 5,500 positions, 7% of its workforce, as part of an ongoing shift to recurring, software-based revenue models and the cloud. (See Cisco Throws 5,500 Overboard on Cruise to Richer Waters.)

Robbins identified future growth areas as security, collaboration and Application Centric Infrastructure (ACI), its SDN technology.

Robbins attributed weak demand to “overarching macro uncertainty in the economy” and “political and regulatory environments that are somewhat uncertain in the US and throughout the world.”

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