Given its long history in the router business, Cisco Systems knows well the difficulty of changing lanes.
The storied tech giant has been working hard over the past few years to diversify its business away from the type of expensive networking equipment on which it made its name. That has included acquisitions—16 announced in the past two years alone—and a shuffling of its operating segments in an effort to draw more attention to a growing base of recurring, software-centric revenues with better growth prospects.
Big ships turn slowly, though: Cisco’s fiscal second-quarter results, reported Wednesday afternoon, still showed 56% of the company’s revenue coming from its “infrastructure platforms” segment, which include its legacy switch-and-router businesses. That is down from 60% three years ago. The company’s application and security segments together accounted for 15% of revenue for the recent period, compared with 12% three years ago.
That shows some progress, but Wednesday’s results also showed that Cisco still can squeeze some new life from its old businesses. A major refresh of its switching products last summer helped lift the company’s overall revenue by nearly 3% year over year to $11.9 billion for the period ended Jan. 27. That was Cisco’s first quarter of growth after eight straight periods of declines. The applications and security segments each grew revenue by about 6% year over year.
Those results, along with a better-than-expected forecast, were good enough to boost Cisco’s share price by 6% in after-hours trading. Investors also are enthusiastic about the company’s cash hoard of $34 billion, net of debt, that could fuel future deals thanks to the recent tax overhaul. Cisco still has plenty of diversification ahead of it, but a revived core businesses should make the process less painful.