Cisco’s latest earnings (report) were dragged down by performance of the infrastructure platforms business. What gives?
In yesterday’s earnings call, Bank of America Merrill Lynch analyst Tal Liani asked the data networking giant: “Infrastructure Platforms are down 16 per cent year over year. And it’s worse than all of your competitors. If I just look at switching and routing in Juniper and Arista on a global basis, without getting into details of the composition, you’re down more than they are. And the question is, why is it down so much versus competition?”
Cisco chairman and CEO Chuck Robbins replied: “If you look at what really drove that, it was compute, and a lot of it is sort of the pricing that came through compute, which neither of those competitors you mentioned have.”
That means Cisco UCS servers and and HyperFlex HCI systems based around them.
William Blair analyst Jason Ader told his subscribers; “While Cisco has been attempting to pivot its business toward a greater mix of software and recurring revenue, we believe the pandemic has spotlighted the firm’s product deficiencies (especially in the cloud), nonstrategic assets (e.g., Cisco’s compute portfolio), and competitive challenges (best-of-breed competition chipping away in multiple product areas).”
We asked Ader if he thought Cisco should dispose of its UCS and HyperFlex product lines. He told us: “Yes on UCS. Especially if they want to be more of a software play.”
Cisco’s Manish Agarwal, director of product management for HyperFlex, blogged earlier this month that Cisco will introduce a software-only version that can run on UCS and third-party x86 servers – with a “Cisco Validated” stamp – and in the public cloud. This frees HyperFlex from UCS dependency and launches some time in 2021 But why on earth is Cisco, a networking equipment vendor, offering an HCI product at all, if not to sell its UCS servers?