Cisco Systems Inc CSCO
Q1 2011 Earnings Call Transcript

Transcript Call Date 11/10/2010

The unique way we combine products, customer segment, market adjacencies, security, mobility, video, et cetera, appears to be clearly understood by our leading-edge customers and how the pieces come together from a technology architecture perspective and the advantages that this approach has in enabling customers' business goals.

Our customers also understand our ability to accelerate this innovation machine in a way that protects their investments in Cisco's products. In short, any device to any information across any combination in networks, in any format with video playing an increasing role, from the home to the cloud is playing out as we expected in our strategy.

We had several other significant accomplishments this quarter. First, from a product innovation and market share perspective, it was a very solid quarter. From a revenue perspective, routing was up 13% year-over-year with high-end routing which includes the acquisition of Starent, up 16% year-over-year and mid and low range routing, up 7% and 8% from a revenue perspective year-over-year. Switching was very solid with a 25% year-over-year revenue growth, with both modular and fixed switching showing equal growth.

Second. Our key new products are filling in our architectural approach and are evolving very much in line with our strategy. The proved point being that our new product category, as Blair outlined in her introduction, grew 22% year-over-year from a revenue perspective in Q1. Data center led the way with a very strong 59% year-over-year growth, followed by collaboration with growth of 45% year-over-year. We will provide more details on these two major growth opportunity areas in a moment. Video connected home grew 11% year-over-year followed by wireless at 9% and security was down slightly at minus 2% revenue growth year-over-year.

Third, our new next-generation products continue very solid customer acceptance. The following will be discussed in terms of revenue year-over-year. The ASR edge routers grew approximately 200% year-over-year with a current annualized run rate of approximately $1.4 billion. The ASR 9000 was especially strong with over 700% growth year-over-year with an annualized run rate of $280 million. These ASR products continue to lead the market at the edge of the network and are very well positioned for future growth.

Our Nexus product family also continued to be very strong with year-over-year growth in excess of 120% and an annualized run rate of approximately $1.5 billion.

Our UCS server product family had another extremely strong quarter with growth year-over-year of 550% to an annualized run rate of almost $500 million. The number of UCS customers has grown steadily over the last three quarters from 900 three quarters ago in Q3 of FY'10 to a total of 1,700 in Q4 of FY'10 and approximately 2,800 in the current Q1 of FY'11. We now have over 40 customers who have ordered over 1 million of UCS systems from the time of initial product introduction.

We are also starting to see many of these systems now going into production rather than initial pilot systems. Over the next several quarters, we hope to start seeing our first large orders for major data center implementations.

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