Cisco Systems Inc Q3 2015 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Simona Jankowski - Goldman Sachs - Analyst : Hi John, and congratulations on all that you've accomplished in the last 20 years. And I also want to wish Chuck all the best of luck going forward. In terms of my question. So John, you spent quite a lot of time on this call talking about a very positive inflection point. And I just wanted to understand if that is something that you expect us to see externally in terms of accelerating revenue growth, or do you think that because you're also transitioning to more software in a recurring revenue model, that's going to really mask it because we're going to have that business mix? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2015 / 8:30PM, CSCO.OQ - Q3 2015 Cisco Systems Inc Earnings Call In terms of timing, if it is something that you think will accelerate the business, are you looking at the next couple of quarters or more the next couple of years? Just wanted to get a sense of the timing of the inflection.

Question: Amitabh Passi - UBS - Analyst : Hi. How are you, John? Congratulations again from my end, and Chuck congrats to you as well.

Question: Amitabh Passi - UBS - Analyst : John, the one area I wanted to maybe get your thoughts on. You've been talking about Intercloud. It's a key pinnacle to your cloud strategy over the last couple of quarters. Yet I think outside of some of the larger metrics you've shared in terms of the traction with Data Centers and customers, is there any help you can give us in terms of how we think about the monetization potential with Intercloud and how that's tracking for you?

Question: Brian Modoff - Deutsche Bank - Analyst : Hey, John. Congratulations as well on your new role. It's been nice working with you over the last 20 years. Chuck, good luck in your new role as well.

Question: Brian Modoff - Deutsche Bank - Analyst : My question, John, is by FY16 you could see the web 2.0 CapEx higher than what you're seeing out of the carriers, the AT&Ts and Verizons. How's Cisco positioned to sell into the web cloud customer base as trendsetters in the spending market? How is Cisco preparing for the CapEx to OpEx transition you're seeing with cloud services, a shift from buying boxes to buying services? Can you talk a little bit about how you're seeing that play out and what you think that growth will be for Cisco over the next few years? Thanks.

Question: James Faucette - Morgan Stanley - Analyst : Good afternoon. Congratulations to John and Chuck from me as well. Just wanted to ask quickly on Security, and it's an area that obviously saw good growth. But I'm wondering how Security and security concerns may be impacting demand in some of your other product segments, firstly. And secondly, also related to Security. How should we think about your efforts in Security and areas where you may see some room for improvement in the product portfolio, et cetera? Thank you.

Question: Pierre Ferragu - Sanford C. Bernstein & Co. - Analyst : Hi. Thank you for taking my question. I'd like to discuss a bit like the transition, the CEO transition, Chuck and John. Could you tell us about, John, how you see your role going forward as an executive search? How are you going to keep yourself busy? Are you going to have a you day-to-day role with clients? And maybe if you can make a difference between maybe like a transition period, and on a more like run-rate basis on the back of that, how you're going to continue to be involved, if any? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2015 / 8:30PM, CSCO.OQ - Q3 2015 Cisco Systems Inc Earnings Call

Question: Mark Sue - RBC Capital Markets - Analyst : Thank you, John. Hi. Thank you John, and welcome, Chuck. Cisco is steadily growing its SaaS business and recurring revenue. With this uptick in the pace of software growth as we transition from boxes to solutions, should we start thinking of and planning for a long-term lift to margins? And with more software comes higher cash flow. Should we start to also think about more cash ultimately coming back to shareholders?

Question: Tal Liani - BofA Merrill Lynch - Analyst : Hi, guys. I'm adding my own congrats to John and Chuck. I wanted to ask about Switching. You're into a major cycle of Switching. New products that brings you into new markets, or develop new markets, et cetera, and creates a replacement cycle. But still the numbers are not that impressive, at least on a sequential basis. Revenues were down 6% in January and down 1.5% this quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2015 / 8:30PM, CSCO.OQ - Q3 2015 Cisco Systems Inc Earnings Call I know on a year over year it looks good, but that's because last year was so bad. I'm trying to kind of do -- look at the sequentials to see what's the growth is looking like. The question is, why don't we see higher numbers with Switching? What prevents the numbers from going up? And maybe you can relate here to units versus prices. I'm trying to see if it's a pricing issue rather than a unit issue. Thanks.

Question: Brent Bracelin - Pacific Crest Securities - Analyst : Thank you for taking my question here. John, you started out kind of breaking a cardinal rule. I have a follow-up on that one. Hopefully you'll be willing to share more color. As you think about -- .(Laughter) (Multiple speakers) As you look at digital transformation projects, the 1200 projects, $3.7 billion pipeline certainly is an important proof point, shows you, kind of at least why you're seeing some of the strength in the enterprise and commercial side. My question, and the question I get from investors a lot is, how is Cisco doing relative to expanding the footprint beyond kind of the core switching and routing business? It's still 45% of your revenue today. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2015 / 8:30PM, CSCO.OQ - Q3 2015 Cisco Systems Inc Earnings Call As you look at that pipeline around digital transformation, what's the attach rate on servers, software, services? Can you give us some sort of color that's some sort of leading indicator to let us understand how well you're doing relative to expanding the overall footprint as you help enterprises transform their businesses?

Question: Ittai Kidron - Oppenheimer & Co. - Analyst : Hi, John. Again, congrats to you. Chuck, good luck to you in your new role. John, I had a couple of questions. First, going back to the service provider comment. You've talked about it being down 7% globally. Your Routing business was actually up on a year-over-year basis. And yes, your service provider video was down 5%. Can you give us a little bit, make up sort of the difference, what are the other product categories in which you're seeing issues or challenges on the service provider side? Second, regarding the transformation point, which is very evident in your US results, which are quite impressive. What is it in that pitch that doesn't resonate, or takes a long time to resonate, everywhere else? Why is that not something that drives Europe up as well 10%, 15%? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 13, 2015 / 8:30PM, CSCO.OQ - Q3 2015 Cisco Systems Inc Earnings Call