Cisco CEO On Reported Splunk Deal: ‘We Are Constantly Evaluating Potential Opportunities’

“We are always disciplined and continue to focus on organic and inorganic opportunities … You should expect us to continue to be very disciplined as we move forward,” said Cisco Chairman and CEO Chuck Robbins during the company’s Q2 2022 earnings call.

Cisco Systems addressed the elephant in the room on Wednesday evening: whether a Splunk acquisition was on the table after a report surfaced last week.

“We are always disciplined and continue to focus on organic and inorganic opportunities … You should expect us to continue to be very disciplined as we move forward,” Cisco Chairman and CEO Chuck Robbins during the company’s Q2 2022 earnings call when asked by analyst about the reported deal. “We are constantly evaluating potential opportunities. For every deal we do, we probably look at 10-15 companies. We base our decisions on strategic fit, cultural fit, and equally as important, the financial and evaluation fit.”

Robbins also cited the company’s policy not to comment on rumors or speculation regarding the reported Splunk acquisition.

Cisco and Splunk have been in the news since last week when The Wall Street Journal reported that Cisco had made an offer for Splunk worth more than $20 billion. The deal would be Cisco’s largest price tag to date for any technology acquisition.

[Related: Potential Cisco-Splunk Deal ‘Massive’ for Software, Security Focus: Partners]

On the financial front, Cisco posted its third straight quarter where product order growth was up more than 30 percent year over year. The company’s total annualized recurring revenue was up 11 percent year-over-year, to $21.9 billion, which fueled an all-time high backlog and strong sales pipeline, Robbins said. He added that enterprise sales saw a 37 percent increase in order growth, the highest in 12 years, as enterprises prioritize investing in hybrid work and digital transformation.

Software revenue was $3.8 billion during Cisco’s fiscal Q2 2022, an increase of 6 percent year over year. Subscription revenue climbed 7 percent year over year to $5.5 billion. During Cisco’s fiscal second quarter, 80 percent of its software revenue was subscription-based, up 4 percentage points from last year’s Q2.

“We remain one of the biggest software companies in the world,” Robbins said.

Cisco’s End-To-End Security segment posted 7 percent growth during second quarter of 2022 to $883 million, which Cisco CFO R. Scott Herren said was driven by double-digit strength in its zero-trust portfolio.

The company’s Hybrid Work portfolio, which includes its videoconferencing and collaboration products, declined 9 percent year over year to $1.07 billion in revenue in the second quarter of the year, which Herren attributed to declines in collaboration endpoints. The company is changing its Hybrid Work portfolio to be called simply “Collaboration” moving forward.

Cisco’s former Infrastructure segment, now called the Secure, Agile Networks segment, which includes the core switching and routing businesses, posted revenues of $5.90 billion during the quarter, a 7 percent raise compared to Q2 2021’s result.

Secure, Agile Networks segment success was driven by demand for hybrid networking solutions, such as Wi-Fi 6 offerings and the Meraki and Cat 9k product line, Robbins said. Cisco earlier this month introduced Catalyst 9000x switches built with Silicon One technology, high-end Wi-Fi 6E access points, and as-a-service Private 5G for the enterprise.

Cisco’s Internet for the Future segment, which includes the company’s telecommunications, cloud, and optical networking products, posted 42 percent growth year over year, with revenues of $1.32 billion. Cisco’s Webscale businesses posted order growth up 70 percent during the quarter, according to the company.

For fiscal Q2 2022 which ended January 29, Cisco’s revenue increased 6 percent to $12.7 billion compared to $12.0 in the year-ago quarter. Cisco posted non-GAAP earnings per share of 84 cents, up 6 percent year over year compared to 79 cents in Q2 2021, and non-GAAP net income of $3.5 billion in Q2 2022, an increase of 6 percent compared to Q2 2021. The company’s earnings surpassed Wall Street’s predictions of revenues of $12.6 billion and non-GAAP profits of 81 cents a share.