Good morning. Cisco Systems, which is gearing up to meet the AI demand on enterprises, just made a big leap among the Fortune 500. The San Jose–based digital communications giant, with revenue of $57 billion in 2023, moved up eight spots from last year’s ranking to no. 74 in this year's list, released just this morning.
I sat down with Cisco EVP and CFO Scott Herren to chat about how the company with about 85,000 employees worldwide handles networking, security, collaboration, and cloud management. One aspect that's kept Cisco at the forefront of its industry is “the investment that we make in R&D, and the innovation that drives,” including a focus on core networking and AI, he added. Cisco spent more than $7.5 billion on R&D in 2023.
In order for a firm to have an effective AI strategy, you need data, networks to move the data, and security, Herren explained. “We're very well positioned on all three of those, post the Splunk acquisition, so I see us clearly as a leader in AI over the next three to five years."
Cisco announced in March it had closed the $28 billion all-cash acquisition of Splunk, a cybersecurity and analytics company that uses AI and machine learning. “It fits perfectly with our security strategy,” Herren said.
In addition to the Splunk acquisition, Cisco in April announced Hypershield, an AI-native system that puts security "in every software component of every application running on your network; on every server; and in your public or private cloud deployments."
Cisco has been active over the past few years integrating AI into products. Webex AI strategy uses real-time communications for audio and video, with applications featuring background noise removal, for example. When Herren is on a call, the tech can filter out the noise of his dog "sitting 10 feet from me barking like crazy" when a package is delivered. And Webex AI Assistant provides meeting summaries, including highlights and action items, and real-time language translation.
Cisco is also slimming down. The company announced in February that it would be letting go over 4,000 staff members. But that hasn’t let that get in the way of its ESG goals, which employees cite as one of the things they like best about Cisco, which landed at the No. 2 spot on the 2024 Fortune 100 Best Companies to Work For list released in April. The company launched the Aspire Fund in 2020, through which it’s investing $50 million in startups led by diverse leaders who are brought into Cisco's ecosystem.
ESG practices and regulatory reporting have become “a big part of what I focus on, and frankly, it's something that I care deeply about,” said Herren, who's been CFO for more than three years after holding the role at Autodesk for six years following 15 years at Citrix.
In the quarter ended April 27, Cisco reported earnings and revenue that beat Wall Street’s estimates, even with sales falling from a year earlier. I asked Herren how he manages the short term while preparing for the long term. “You control what you can control; obviously, you do what you can short term,” he said. “What we do, and I think what all of my peers work to do as well, is drive shareholder value over time.”
Sheryl Estrada
sheryl.estrada@fortune.com
