Cisco Systems, Inc. appointed AMD CEO Dr. Lisa Su to its board of directors on Monday, January 27th. What does this mean for Cisco? And how does AMD benefit from this appointment? This quick take will attempt to answer these questions and more.
First, what does this appointment mean for Cisco?
Cisco employs over 70,000 people to design, develop, market and sell networking, computing and security solutions in the IT Services space. The company, probably most well-known for its portfolio of networking products, also has a significant footprint in the server computing space with its Unified Computing System (UCS) product line. Under the “compute” umbrella, Cisco also develops and ships hyper-converged infrastructure (HCI) and converged infrastructure (CI) solutions. Additionally, the company has developed an infrastructure management platform “as-a-Service.”
In the last quarterly report, Cisco posted revenue that was up 2% year over year, with downward guidance of 3%-5%. While its platform revenue was down 1% (YoY), application and security revenues were up 6% and 22%, respectively.
Looking at the trends in the market, these numbers make sense. The networking and server spaces were impacted by cloud adoption, infrastructure convergence and the adoption of software-defined everything. As infrastructure growth in the cloud outpaces traditional on-premises, large cloud service providers (CSPs) are building open networking and compute platforms that rely on commoditized, customizable platforms. Meanwhile, on-premises infrastructure deployments have seen IT organizations move toward solutions-based deployments of infrastructure. A good example of this is HCI, where compute, networking and storage are shipped in a single, pre-configured package with plug-and-play setup and management. Such deployments certainly make it easy for the IT administrator to overlook the individual components as the focus is on the application that simplifies the process of deployment, provisioning and management.
This market outlook is not meant to paint Cisco’s future in a negative light. The company continues to show growth and strong financials. Every infrastructure provider in the IT Solutions market faces similar challenges.
Why is the above relevant? As a normal part of any business operation, a reassessment and potential refinement of strategy are essential. Additionally, in today’s market, companies like Cisco must look to where the market is moving and ensure its IP and product portfolio roadmaps align appropriately. This is where the appointment of Dr. Su to the board of directors shows the wisdom of Cisco’s executive team.
Of Cisco’s 11 board members, Dr. Su brings significant semiconductor and systems development experience to the table (she is the only board member with such a resume). The strategic market view and technical guidance she can provide should serve the company well.
Additionally, Dr. Su successfully transformed her company—technically, organizationally, and operationally—from the brink of failure, to market leadership. While Cisco does not require such extreme services, her experiences can certainly assist Cisco’s executive leadership as it continues to calibrate its strategy.
Second, what does this appointment mean for AMD?
Dr. Su’s appointment to the Cisco board of directors means a few things for AMD. First and foremost, this appointment should lead to an expansion of AMD’s footprint in the Cisco product portfolio. Cisco first adopted AMD into its server portfolio when the EPYC processor launched. At the time of this writing, AMD EPYC is in the UCS C125 server rack node (four of which can reside in the C4200 server chassis). By contrast, Cisco’s main competition, Dell EMC, HPE and Lenovo, have been more aggressive in the adoption and promotion of EPYC-based platforms. There is a lot of opportunity for AMD to expand into Cisco’s more mainstream product offerings and compute solutions.
Perhaps more importantly is the expanded footprint AMD can find in Cisco’s networking platforms via its embedded CPU offerings. These products, somewhat customized and somewhat defeatured, are designed by AMD to sit as the compute engine for a lot of datacenter infrastructure gear, such as networking. Cisco’s networking platforms dwarf its compute platforms (in terms of shipments), so a number of design wins for AMD could have a significant impact on its topline Enterprise, Embedded and Semi-Custom (EESC) revenue numbers.
The appointment of Dr. Su can also indirectly increase the ramp of EPYC in the datacenter. It’s reasonable to assume that the appointment of Dr Su will bring EPYC into more of the Cisco sales force’s enterprise sales discussions. Also, expect to see more focus put into EPYC in go to market (GTM) messaging and campaigns. This renewed effort can create a dynamic by which Cisco’s competition is forced to, in turn, ramp up GTM and sales efforts in support of respective EPYC-based platforms. In the end, this should be a win for AMD.
Some closing thoughts
Dr. Su has received many accolades for her success at turning AMD around, and deservedly so. The turnaround was more than just building a competitive CPU, which was a difficult achievement in and of itself. The turnaround included tearing down old organizational silos and changing the culture of a business that had not been competitive in its market in years. For this, Dr. Su would be a valuable addition to virtually any board of directors she joins. Chalk this one up to a win for Cisco, AMD and the market.