Cisco CEO Robbins Sounds Off On FireEye, Ericsson & Recurring Revenues

Robbins In Davos

Networking giant Cisco is taking aim at FireEye with its Sourcefire technology, said Cisco CEO Chuck Robbins at the World Economic Forum in Davos, Switzerland, held Jan. 20-23.

In an interview with Bloomberg at the forum, Robbins talked about the future of the San Jose, Calif.-based company, including how Cisco is "early in the journey" to a recurring revenue model and what the company sees ahead for cybersecurity M&A. Robbins hinted at an upcoming major announcement regarding its strategic partnership with Ericsson. "We have some exciting things we're going to do together at Mobile World Congress in a month," Robbins said.

Robbins also weighed in on whether security specialist FireEye was on Cisco's 2016 docket for acquisition, a move analysts are predicting.

Here, a look at Robbins' interview at the forum, plus some analysis from partners and experts about what it all means.

FireEye Acquisition?

Is FireEye on Cisco's acquisition list for 2016? "They're on our lists for different reasons," Robbins said in the interview.

"We have taken the Sourcefire technology that we bought a couple of years ago, and our teams have done a phenomenal job of integrating that capability throughout every element of the network," Robbins said, "and they've really created an architecture, and that's been the secret to our success. It has created some challenges for some of our competitors."

In May, speculation arose that FireEye had been the target of a $9 billion buyout bid by Cisco -- a move the networking giant denied.

In a recent report, Daniel Ives, managing director and senior analyst at M&A expert FBR, predicted FireEye will be bought in 2016, citing Cisco as a top candidate.

Solution providers say FireEye's malware detection and other security solutions would be a good fit for Cisco.

Cybersecurity M&A

Robbins said Cisco will "clearly" be looking for M&A opportunities around security, but also at its internal R&D and strategic partnerships.

"If you look at how we think about innovation and expanding our portfolio, entering new markets -- we look at internal R&D, we look at the strategic partnerships, and we clearly look at M&A in addition to early-stage investments and frankly, co-development with our customers," said Robbins. "So we'll continue to use M&A as a vehicle in conjunction with R&D. We've got a lot of great internal startups going on around machine learning and security initiatives."

Last year, Cisco revealed plans to buy security company Lancope for $452 million, cloud-based security specialist company OpenDNS for $635 million, and security consultancy firm Portcullis Computer Security for an undisclosed amount.

Does another acquisition look likely? "Oh, yeah, they're going to buy a security company this year, definitely," a top executive solution provider and Cisco Gold partner, who declined to be identified, told CRN. "It just depends on the size -- will they go for a big one, like people are talking about … a FireEye, Check Point [Software Technologies], those types of guys, or stay around the [$500 million] mark and get two or three."

Recurring Revenue

Capturing recurring revenue was top of mind in 2015 for channel partners striving to become strategic service providers. At the forum, Robbins said Cisco is evolving and expanding more toward a recurring revenue model, although the company is "early in the journey."

"Customers, they want to buy their IT assets more as they use them. So we have evolved natural areas of our portfolio to being delivered as a service," said Robbins. "We're beginning to focus more and more of our portfolio on software, and that's what our customers want and that's also what our investors want."

Robbins touted Cisco's collaboration portfolio's recent revamp as being on the front end of its recurring revenue push. Cisco overhauled its flagship collaboration solution Cisco Spark from a messaging-centric application to a complete end-to-end collaboration solution -- providing partners with a slew of new recurring revenue opportunities.

"We'll continue to evolve other parts of our portfolio to meet the customers' needs and how they want to consume the technology," said Robbins.

Ericsson Partnership

Regarding Cisco's strategic partnership with mobile and smartphone communications giant Ericsson, Robbins said to be prepared for a major announcement at the Mobile World Congress (set for Feb. 22-25 in Barcelona, Spain).

"We have some exciting things we're going to do together at Mobile World Congress in a month, and I'll tell you, I've never seen a strategic partnership where we saw the pipeline from our teams roll up so quickly, and when our field teams tell us it was a good decision, then we feel pretty good about it," said Robbins.

Cisco formed a joint development pact with Ericsson in November, which partners and analysts say has huge potential in the emerging Internet of Things market. The alliance was formed to develop next-generation service provider networks and new platforms and services.

Robbins said he's spending a lot of time with Ericsson CEO Hans Vestberg at the Switzerland economic forum.

Internet of Things

There's little doubt about how Robbins plans to bring Cisco back to exploding revenue growth. When asked whether Cisco would ever achieve double-digit growth again, Robbins said the Internet of Things is the answer.

"There's 18 billion devices connected to the Internet," said Robbins. "By 2020, there are going to be 50 billion. What that means is not only massive connectivity that we have obviously built our business on, but the opportunity to help customers really derive value from the insights of those connections, through the data and organizing that data, analyzing that data and -- even more importantly -- securing that data for our customers. [These] are all growth areas, as [is] providing data center services."

Nearly 60 percent of Cisco's product sales for fiscal year 2015 -- about $22.4 billion -- came from switching and routing. Robbins wants to use that networking stronghold to expand software and services capabilities around IoT as billions of previously unconnected devices become connected in the coming years.

China

The networking leader's investment in China grew substantially in 2015, revealing a $10 billion initiative toward the country that includes "renewed commitment" and agreements with the Chinese government to expand partnerships, research and investments in "next-generation" Chinese technology, and spur job creation.

Robbins said his China outlook is that it's "a great opportunity for us and we're going to stay in for the long haul."

"In our last quarter, we announced our first quarter of return to growth in two and a half years. The Chinese government, they're making the moves they need to make in light of the complexities and transitions they're going through," said Robbins. "We've diversified our business over there geographically and across customer segments. … We've seen some pretty good success recently."

Strategic Partnerships

Cisco formed numerous strategic partnerships last year with the likes of Ericcson, Apple and Verizon. Robbins said Cisco will take that same strategy into 2016.

"The pace at which the change is going to occur is faster than anything we've ever seen," said Robbins. "We believe that the strength of these strategic partnerships are fundamentally driving greater value for our customers faster together than we could individually. We're excited about 2016."