Networking giant Cisco Systems (CSCO, Financial) is aggressively looking to strengthen its revenue streams after the top line suffered a hit of 8% in the past quarter. The company plans to enter cloud services and is expanding its video solutions portfolio. These steps could boost fundamentals going forward. Let’s find out what Cisco has under its sleeves.
Enhanced Video Technology
Cisco offers video software solutions to its service provider customers through the Videoscape platform. The company enhanced its portfolio by introducing Virtualized Video Processing (V2P) solution in the NAB 2014 electric media show. The show, hosted by the National Association of Broadcasters, unveils the latest innovations in the content delivery platform and is a good way of reaching a broader audience.
Cisco claims that the solution will help its service provider customers to minimize the challenge of multi-screen video content delivery service. In a multi-screen video delivery, a service provider needs to manage different tools and applications for delivering contents to different platforms like mobile devices, desktop PCs, set-top boxes, gaming consoles and televisions. This requires a complex workflow and IT infrastructure. Cisco’s new V2P solution would simplify the workflow and the IT infrastructure through its virtualization techniques will help service providers benefit from lower cost of supervision.
It had strengthened the Videoscape platform with the acquisition of NDS Group, a video software and security solutions provider, in July 2012. Successful integration of NDS and growing popularity of using video software solutions among service providers helped Cisco strengthen its revenue stream.
Considering the growing appetite for online video sharing for businesses and marketing, it is expected that the task of service providers in delivering video contents is going to grow enormously. According to market research and consulting company MarketsandMarkets, content delivery networks or CDN market could reach $12.2 billion growing at a CAGR of 26.3% from 2014 to 2019. And another research firm Gartner is positive about improved spending in the telecom services market globally. This bodes well for Cisco.
Huge Investment in Cloud
Cisco plans to enter the billion-dollar cloud services market and invest nearly $1 billion. It aims to develop data centers, through which its services will be delivered, in around two years.
Market research firm IDC predicts a 23.5% CAGR in worldwide IT cloud services spending between 2013 and 2017. It also expects spending to surpass $100 billion this year.
This is a big move for Cisco as it will bring the company closer to a high-margin enterprise like cloud computing and take it away from the traditional hardware platform that is not performing well. Less supervision and hardware maintenance costs are the main benefits that are propelling customers toward cloud computing.
Cisco will position itself as a direct competitor to key players like Amazon.com (AMZN, Financial), Microsoft (MSFT, Financial) and IBM (IBM, Financial). Cisco knows very well that competing with Amazon Web Services, Microsoft Windows Azure and IBM Smart Cloud will not be easy and hence it is partnering with some channel partners to deliver its cloud services.
Apart from this, Cisco’s existing portfolio of data center offerings will be its biggest advantage. And its huge cash pile of roughly $47 billion will come in handy for spending either on acquisitions or on research and development. This will help Cisco build its place in the cloud services market.
Parting Thoughts
Exchange of video content over the Internet is growing, and Cisco is playing the right cards by expanding its video content portfolio. Appropriate and advanced offerings could solidify its position in the service provider end market. Cisco’s entry in the high-margin cloud services market could reverse the declining hardware sale trend. Although a late entry and presence of a number of big players in the cloud services market are challenges, there is enough opportunity for growth and Cisco’s wide scale of operations will make its journey smooth.
