Cisco Systems said recent bets on new software and services businesses are showing signs of success.
While revenue for the company’s core businesses—switching and routing systems—fell 3% and 5% respectively last quarter, revenue from newer areas like videoconferencing and security products and services were up.
Cisco is particularly interested in subscription-based services, where it can maintain steady income as demand for its traditional hardware continues to cool.
Despite slowdowns in traditional areas, newer parts of the company helped Cisco beat overall revenue expectations in the last quarter. Cisco’s videoconferencing revenue climbed 10%, for example, while revenue from security products and services rose 17%.
CEO Chuck Robbins said its customers appear to be upgrading hardware less frequently.
"We see customers spending where they need to spend," Robbins said on a conference call. "There is still a fair amount of caution in the market."
At the same time, new competitors are offering cheaper products to undercut the networking giant.
Cisco saw the shift coming, and invested in several other types of business preemptively. Cisco recently bought six companies in less than five months, including OpenDNS for $635 million and IoT provider Jasper Technologies for $1.4 billion. Purchasing other companies, especially if they are already somewhat "proven," has provided Cisco a shortcut to new solutions or technologies.
Many of the businesses Cisco has purchased use subscription-based business models, a new approach for Cisco, which is rooted in hardware and one-time purchase sales models