& cplSiteName &

Cisco Earnings Suffer From Carrier Weakness

Mitch Wagner
5/14/2014
50%
50%

Weak carrier business continues to drag down Cisco's revenue, but that sector is improving, and future growth will be driven by the cloud, the Internet of Everything, and other new technologies and markets, the company said in its fiscal third-quarter earnings call Wednesday.

Cisco reported third-quarter revenue which it said demonstrated "solid execution." For the quarter that ended April 26, the company reported revenue of $11.5 billion and a profit of $2.2 billion, or $0.42 per share. The 5.5% decline in revenue from a year earlier was lower than expected. Wall Street on average had expected revenue of $11.36 billion.

In the same quarter last year, Cisco posted revenue of $12.2 billion and a net profit of $2.5 billion.

"Our financial results exceeded the guidance we provided last quarter as we demonstrated clear progression returning to growth," John Chambers, Cisco's chairman and CEO, said in a press release.

The service provider market is an area where the company is having problems "both macro and Cisco specific," Chambers said during the call. "Service provider orders were down 5%, showing improvement from the 12% decline in Q2 and 13% decline in Q1." Weakness in emerging markets hurt the service provider market. Also, service provider video revenue declined 26%, and orders declined 11%.

"We are seeing some signs of stabilization in the SP business but believe it will take multiple quarters to return to growth," Chambers said. "We will continue to make changes we need to to lead in the service provider market."

He highlighted two industry and Cisco transitions that will drive future growth: the cloud and the Internet of Everything. This past quarter, Cisco announced its Intercloud strategy, which it calls the first global open network of clouds. Previously announced partners include Telstra Corp. Ltd. (ASX: TLS; NZK: TLS). Cisco plans to make more announcements at its Cisco Live conference next week, including two new public cloud partners. (See Cisco's Cloud Bet: What's in It for SPs? and Can Cisco Help SPs Offer Cloud-based Apps?)

The company's Meraki cloud networking business grew more than 150%, with the customer count growing about 30% from the fiscal second quarter, Chambers said.

On the Internet of Everything, Cisco customers, including Royal Dutch Shell and The Weather Channel, will present at Cisco Live on the heels of the departure of Guido Jouret, the company's vice president and general manager heading its Internet of Everything initiative. (See Cisco's IoT Leader Finds Other Things to Do.)

Chambers singled out SDN as an area for growth. The company will "not only embrace SDN and benefit from it, but we're going to lead in SDN." Cisco will embed its Application Centric Infrastructure in the cloud, data center, LAN, and edge network. (See Defining SDN & NFV, The Three Faces of SDN, and Cisco's ACI Gets Physical With SDN.)

Another area where Cisco faces stiff competition is in its Unified Computing System. But that competition isn't coming from IBM Corp. (NYSE: IBM), HP Inc. (NYSE: HPQ), and Dell Technologies (Nasdaq: DELL), Chambers said. Cisco is seeing 29% growth in its server business, compared with negative growth for the other three companies combined. The major competition, he said, is white labels.

"We're going to sell architectures in the white label approach, as opposed to standalone products," he said. "I personally believe standalone products from any company, whether a standalone switch or a standalone server, will get squeezed pretty hard."

Chambers expects a return to growth to take time. "It will probably be a little bit bumpy. It won't be just one quarter you finally turn the corner, and the next quarter you're there," he said. "We are very pleased with this quarter. Next quarter is set up pretty well. But we've got some really heavy lifting to do, and I'm sure a couple of bumps along the way, especially in emerging markets and service providers."

For the fourth quarter, Cisco expects total revenue to decline up to 3% or rise up to 1% from a year earlier.

Related posts:

(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Mitch Wagner
50%
50%
Mitch Wagner,
User Rank: Lightning
5/17/2014 | 4:33:24 PM
Re: Only in PR-land
To be fair, the profit decline is slowing. And Cisco seems to be making the transition to software-defined networking. 

They're right about one thing: Vendors that can offer a complete portfolio of hardware, software, and services will dominate this market. Particularly if those companies can assemble solutions based on products from multple vendors. 

And the whole thing is going to cloud-based networking in the long run. 
danielcawrey
50%
50%
danielcawrey,
User Rank: Light Sabre
5/15/2014 | 11:31:16 PM
Re: Only in PR-land
I would think that Cisco has more potential in SDN rather than in any sort of cloud offering.

But it's smart to stay diverse: Whether it comes down to unified communications, cloud computing or software defined networking, if Cisco has its hands in each area it will find ways to make sales. 
DOShea
100%
0%
DOShea,
User Rank: Blogger
5/15/2014 | 9:54:48 PM
Re: Only in PR-land
A lot of Chambers' comments sound like more of the same from the last two or three quarters, which I guess means there is no new thinking about how to address what could be a changing service provider market.
Mitch Wagner
50%
50%
Mitch Wagner,
User Rank: Lightning
5/15/2014 | 1:18:35 PM
Only in PR-land
Only in PR-land does declining revenue and profits get described as "solid execution." 

"We're bleeding less than we were last quarter!" 

 
From The Founder
Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Interviews
Heavy Reading: The Web-Scale View

1|18|17   |     |   (0) comments


At Light Reading's 2020 Vision Executive Summit in Rome, Heavy Reading's former chief analyst Patrick Donegan shared insight from the recent web-scale operators report, which featured research on how web-scale operators view the market, the best web-scale companies to ...
LRTV Custom TV
Cisco's Cloud Scale Networking: Automation, Virtualization & Simplification

1|18|17   |     |   (0) comments


Cisco's Sanjeev Mervana outlines the latest innovations in networking technology at CES 2017 in Las Vegas.
LRTV Custom TV
ADVA Talks Innovation & the Future of Networking

1|17|17   |     |   (0) comments


Ray Le Maistre and Christoph Glingener, CTO of ADVA Optical Networking, discuss the current state of the industry, cooperation and collaboration, open innovation and the future of networking.
LRTV Custom TV
Cisco's Infinite Video Platform

1|17|17   |     |   (0) comments


Cisco's Infinite Video Platform allows service providers to deliver broadcast-quality video over IP networks. Infinite video supports many devices, from 4K TVs to tablets to game consoles. Join Cisco's Rajeev Raman for a brief tour and live demo.
LRTV Interviews
Masergy: Ability to Adapt Key for NFV

1|16|17   |   6:40   |   (0) comments


Speaking at Light Reading's 2020 Vision in Rome, Masergy's VP, Global Technology, Ray Watson, said agility is key to providing the mix and match NFV-based services that are driving business for the managed service provider today.
LRTV Interviews
Equinix: The Data Explosion

1|13|17   |   4:16   |   (0) comments


At Light Reading's 2020 Vision in Rome, Eric Schwartz, president of EMEA, Equinix, talked about how Equinix is helping its customers manage the influx of data today, and how it's preparing for a future filled with millions of connected IoT devices.
LRTV Interviews
Heavy Reading: The Changing Data Center Landscape

1|12|17   |   6:05   |   (1) comment


At Light Reading's 2020 Vision event in Rome, Heavy Reading's Senior Analyst Roz Roseboro talks about how virtualization is impacting data center evolution and how that evolution is affecting the relationship between service providers, data center operators and public cloud providers.
LRTV Interviews
Boingo: Prepping for Millions of Devices

1|12|17   |   5:07   |   (1) comment


At Light Reading's 2020 Vision in Rome, Boingo's CTO Derek Peterson discusses how wireless operators will address the needs of low-bandwidth and high-bandwidth apps at the same time, the need for more MHz, the impact of IoT and more.
LRTV Interviews
Comcast Shows Off Gig Gateway at CES

1|11|17   |     |   (1) comment


With its largest presence at CES in years, Comcast took the wraps off its long-awaited gigabit gateway and a new platform for managing the home WiFi network. Light Reading Senior Editor Mari Silbey sat down with EVP Chris Satchell to discuss the latest Comcast advance, and met with VP of Product Strategy and Development Andrea Peiro to walk through a demo of the ...
LRTV Interviews
Colt: End-to-End Key for 2017

1|10|17   |   6:21   |   (0) comments


At Light Reading's 2020 Vision Executive Summit in Rome, Nico Fischbach of Colt said having a multi-carrier, end-to-end service proposition is going to be key for 2017 -- and SD-WAN is instrumental in making it happen.
From the Founder
Cisco's Clemson on Mobile Cloud Video

1|9|17   |     |   (1) comment


Cisco's Conrad Clemson, recently promoted to head up the company's Service Provider Apps & Platforms developments, talks to Light Reading's Founder and CEO Steve Saunders about how he's bringing cloud video, mobile and virtualization together to empower network operators. "If you think about where we're going… whether it's a mobile application, or a video ...
LRTV Custom TV
VMware Telco NFV Solutions – Preparing for 5G & IOT

1|9|17   |     |   (0) comments


Shekar Ayyar, EVP & Corporate Strategy/General Manager of Telco for VMware, discusses VMware's Telco NFV solutions role and foundation for the Imminent Arrival of 5G & IOT.
Upcoming Live Events
March 21-22, 2017, The Curtis Hotel, Denver, CO
May 15-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
A Women in Comms Glossary
Sarah Thomas, Director, Women in Comms, 1/18/2017
Is Cable One Beefing Up for Slaughter?
Alan Breznick, Cable/Video Practice Leader, Light Reading, 1/20/2017
Next Plugfest Gets G.fast Closer to Market
Brian Santo, Senior editor, Test & Measurement / Components, Light Reading, 1/13/2017
TV's Paradox: No HDR Without 4K
Mari Silbey, Senior Editor, Cable/Video, 1/17/2017
Nokia CTO: 2017 Is the Year 5G Gets in the Field
Dan Jones, Mobile Editor, 1/19/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading founder and CEO Steve Saunders chats with Sportlogiq CEO Craig Buntin about sports data analysis.
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Animals with Phones
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.