Feisty CEO Chambers Tells Rivals It's Go Time As Cisco Beats Estimates For Q2

Cisco Systems Wednesday reported its best overall fiscal quarter in more than a year, and Chairman and CEO John Chambers doesn't sound like an executive on the verge of retirement, as has been speculated.

After several straight quarters of flat or declining profit, Cisco now feels better about its market position than it has since the 1990s, Cisco CEO John Chambers said on a conference call with financial analysts.

Cisco's business during the quarter was healthy across nearly all of its product lines and geographic regions, and Chambers said this is because customers like what they're seeing from Cisco in key areas such as software-defined networking, security and big data analytics.

"The Cisco brand is stronger than it's ever been," Chambers said on the call.

Chambers is often optimistic but seemed even more upbeat than usual about Cisco's prospects. When one Wall Street analyst asked him why, the 65-year old Chambers said he'd recently run 4 miles in his best time in over a year, and then lifted weights, noting that he's "full of energy" these days.

Excluding items, Cisco reported fiscal second quarter profit of $2.7 billion, or 53 cents per share, up 9 percent from last year's quarter. Revenue came in at $11.9 billion, up 7 percent year-over-year.

Wall Street analysts were expecting Cisco to report 51 cents per share and $11.8 billion in revenue.

[Related: Meraki Founders Say Bye-Bye To Cisco Systems]

Cisco's switching business saw revenue climb 11 percent during the quarter to just over $3.6 billion, fueled by strong sales of the Nexus 3000 and Nexus 9000 switches. Cisco's routing business revenue grew 2 percent to $1.76 billion.

Software-defined networking is a potential threat to Cisco's networking business because it could open the door for customers to buy cheaper hardware from whitebox vendors.

But Chambers said Cisco's switching business is "doing extremely well" in large part because its products feature integrated security and processors that can be used for Internet of Things deployments.

By embedding multiple technologies and features into its networking products, Cisco helps customers achieve "business outcomes," Chambers said.

Customers will pay three times to five times more for these integrated offerings than they would for standalone products, which is why Cisco isn't worried about commodity hardware vendors, Chambers said.

"We're winning very large service provider, enterprise and public sector deals that we would not have won as recently as a year ago," Chambers said on the call.

NEXT: UCS Servers, Security Also See Strong Growth In Cisco's Q2

Cisco's UCS server business also had a solid quarter, with revenue growing more than 40 percent year-over-year to $846 million. The San Jose, Calif.-based vendor's wireless business, fueled by Meraki's $400 million annual sales run rate and 100 percent year-over-year growth, saw revenue jump 18 percent during the quarter.

Cisco's security unit revenue grew 6 percent during the quarter to $416 million, and its collaboration business saw revenue rise 10 percent to $990 million. Cisco's service provider business was the one negative during the quarter, with revenue dropping 19 percent compared to last year's quarter.

On the partnership front, Cisco had a "good relationship" with EMC and plans to continue partnering with NetApp and IBM on converged infrastructure products, Chambers said.

Chambers also told analysts to expect Cisco do more strategic partnerships outside the enterprise technology industry, with companies like GE and Rockwell, both of which are partners in Cisco's Internet of Things ecosystem.

VMware, on the other hand, is now a competitor to Cisco, Chambers said. "We're going to beat them and have fun doing it," he said.

Chambers was also asked for an update on his retirement plans, but as he's done on other recent occasions, he sidestepped the question.

"We've got an amazing team," Chambers said. "We'll make this a non-issue as we make the transition."

PUBLISHED FEB. 11, 2015