Networking giant Cisco (Nasdaq: CSCO) has had a remarkable year so far. Its stock has climbed nearly 18% since the start of the year as the company transforms itself to adapt to the newer technologies. Cisco has been moving away from its traditional business of supplying switches and routers into newer areas of cloud and enterprise collaboration.
Cisco’s Q3 revenues grew 4% over the year to $12.5 billion. It ended the quarter with an EPS of $0.56 on GAAP basis and $0.66 on Non GAAP basis. The market was expecting revenues of $12.42 billion for the quarter with adjusted earnings of $0.65 per share.
By segment, product revenues were up 5% to $9.3 billion. Within the segment, Infrastructure Platforms grew 2% to $7.2 billion, Applications 19% to $1.3 billion, and Security products grew 11% to $0.6 billion. Service revenues grew 3% to $3.2 billion. 32% of its total revenues were from recurring offers, compared with 30% a year ago.
Revenues from Americas grew 2% while EMEA and APJC markets saw growth of 9% and 7% respectively.
For the current quarter, Cisco forecast revenues to grow between 4%-6% for the quarter, compared with the market estimates of 4.75%. It expects to post adjusted fourth quarter earnings of $0.68-$0.70 per share, which is in line with the Street’s estimate of $0.68 per share.
The enterprise collaboration market is seeing intensified competition. According to Synergy Research Group, within the enterprise collaboration market, Cisco currently is the market leader with 13% share followed by Microsoft with 12% share.
During the quarter, Cisco made further enhancements to its offering in the space with the acquisition of Accompany, an AI-based relationship intelligence platform, for $270 million. Los Altos-based, Accompany’s database connects people and companies by providing rich, relevant insights about them. Its platform uses machine learning tools and automates search, creation, and suggestions on updating of profiles for corporate executives. Prior to the acquisition, Accompany had raised $40.6 million at an undisclosed valuation. The acquisition will help further strengthen Cisco’s collaboration portfolio and also take on Microsoft’s LinkedIn. Accompany’s founder Amy Chang will join Cisco’s collaboration group.
As part of its efforts to grow in the cloud services, Cisco also completed the acquisition of BroadSoft this quarter. It had announced the $1.9 billion acquisition in October last year. BroadSoft is known for its cloud-based software used by organizations to manage communications systems and collaborate with each other. Its call control software is often re-labeled and sold by traditional telephone companies to their customers. Additionally, BroadSoft also offers call center applications and software that offers features like call waiting and other capabilities. Cisco plans to integrate BroadSoft’s open interface and standards-based solutions with Cisco’s existing portfolio to offer a full suite of rich collaboration solutions for businesses of all sizes that will be delivered through VAR and Service Provider partners.
Additionally, Cisco is also going strong within the security market. For the recently reported quarter, Security product revenues grew 11% to an annualized $2.4 billion. Its security business has been among its fastest growing segments. It is leveraging AI and Machine Learning to improve products by reducing time to detection and remediation. Its Talos intelligence platform blocks more than 20 billion threats every day, and it continues to innovate within the segment. It recently introduced a comprehensive, integrated data center security architecture that has been designed to protect the data center by seamlessly following any workload anywhere across physical and multi-cloud environments.
Cisco has grown its Security business through constant acquisitions, besides product growth. In less than two decades, the company has acquired more than 20 security players across the value chain. It acquired Cognitive Security, Sourcefire, and ThreatGRID to strengthen the firewalls and threat-detection systems, and acquired companies like CloudLock, Lancope, Portcullis, and OpenDNS to deliver on-premise and cloud-based security capabilities. Right now, there are plenty pickings for it to choose from as well. Earlier this year, the market was speculating that Cisco would buy out FireEye, as FireEye struggles to turn profitable despite revenue growth. FireEye recently reported its first quarter revenues at just under $200 million and an adjusted net loss of $7.5 million. The company is currently trading at a market capitalization of $3.4 billion.
The market is pleased with Cisco’s performance. Its stock is trading at $45.48 with a market capitalization of $217.6 billion. It touched a year low of $30.36 in August last year. The stock had climbed to $46.37 earlier this month.