RESEARCH TRIANGLE PARK – The latest earnings reports for Cisco and NetApp last week document revenue growth – but through different means. Here’s a look at the financials from both tech giants, each of which has a major presence in Research Triangle Park.
Cisco Services’ P&L reflects the company’s transition into pursuing ‘as a Service’ opportunities
Cisco’s (NasdaqGS: CSCO) corporate revenue increased 2.7% year-to-year to $11.9 billion in 4Q17, and Cisco Services’ revenue grew 2.9% year-to-year to $3.2 billion. Cisco Services’ revenue was driven by inorganic contributions from AppDynamics and Broadsoft combined with increased demand for software and solutions support associated with expanding adoption of its intent-based networking capabilities. While the acquisitions provide Cisco with capabilities to expand its addressable market into cloud- and software-based solutions, the integration and portfolio business development costs pressure margins in the short term. Cisco Services’ gross margin fell 20 basis points to 67.4% in 4Q17.
Cisco’s multi-cloud solutions expands Cisco Services cloud professional services growth opportunities.
Cisco continues to evolve its cloud portfolio and strategy to help clients address the complex hurdles, such as fragmentation and loss of control regarding data and security associated with adoption, management and protection of hybrid IT environments. In November Cisco announced a simplified suite of solutions that facilitate clients’ shift to a multi-cloud approach. The portfolio encompasses four solution areas — Cloud Advisory, Cloud Connect, Cloud Consume, Cloud Protect — and allows clients to optimize their IT environments and operate in a multi-cloud world. The Cloud Advisory segment is an essential prerequisite for Cisco’s success as it offers prepackaged advisory services from Cisco Advanced Services and its channel partners to address demand from customers around understanding their environments and not driving their workloads to a particular cloud.
NetApp benefits from the positive revenue streams of strategic investments in 4Q17
In FY3Q18 (CY4Q17) NetApp (Nasdaq: NTAP) achieved $1.5 billion in revenue, representing 8% year-to-year revenue gains. TBR believes traction in key markets, such as the ongoing acceleration of NetApp’s all-flash portfolio and the bolstering of NetApp’s market presence in cloud with its recently launched NetApp Cloud Volumes for Amazon Web Services (AWS) reinforced positive revenue momentum. Recent partnership enhancements, including its converged infrastructure-related partnership enhancement with Fujitsu position NetApp well for long-term gains as the vendor expands its presence in growth markets.
Despite these positive shifts in NetApp’s portfolio, the vendor continues to face an uphill battle against multiline peers, which are able to target the storage market independently from multiple angles. Partnership activity certainly expands NetApp’s ability to capitalize on these same trends, but also makes NetApp more dependent on partners relative to its peers to take advantage of these opportunities. In many cases, this is likely to result in a fast-follower position in emerging markets, as NetApp has to partner to enter emerging markets such as hyperconverged infrastructure, due to the nature of the technology and the absence of servers and networking from its portfolio. That being said, NetApp’s leadership in the storage space and the ongoing demand for its data fabric will bolster the vendor’s position in the space.
