& 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
Light Reading today starts a new voyage as part of a larger Enterprise.
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
Can Cable Climb Upmarket?

12|7|16   |     |   (0) comments


Carol Wilson and Alan Breznick assess cable's prospects for winning more enterprises in a landscape rocked by corporate M&A activity.
Women in Comms Introduction Videos
TalkTalk Exec: Find Your North Star at Work

12|7|16   |   3:38   |   (1) comment


Women need to find their purpose, a professional North Star, and create a personal board for themselves, according to Alex Tempest, director of partners at TalkTalk Business.
LRTV Interviews
Verizon: Beware Unknown Unknowns

12|7|16   |   04:58   |   (0) comments


Chris Novak, director of the Verizon Enterprise Solutions Risk Team, explains that enterprises who don't conduct a thorough audit of their assets often leave some things unprotected because they don't know they exist. Many times these unprotected assets are part of corporate M&A activity but left unshielded they can become a hacker's playground, he tells Light ...
LRTV Interviews
ETSI's CTO Talks NFV, 5G & NGP

12|5|16   |   09:45   |   (0) comments


Adrian Scrase, CTO at standards body ETSI, talks about the various initiatives and specifications developments related to NFV, 5G and NGP (next-generation protocols) that will underpin next-gen networks.
Women in Comms Introduction Videos
Korn Ferry Consultant: How to Find, Cultivate & Be the Best Talent

11|30|16   |   4:10   |   (2) comments


Erin Callaghan, a managing consultant for Korn Ferry Futurestep, shares strategies for companies to improve how they recruit and for women to ensure they don't get lost in the pipeline.
LRTV Custom TV
We Can Make the World More Sustainable

11|29|16   |     |   (0) comments


GeSI is a global e-Sustainability Initiative organization bringing together 40 big multinational companies around the world. According to GeSI's report, information and communication technology can make the world more sustainable. Luis Neves, chairman of GeSI, shared with us his opinion at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
Finding a New Way to Engage Customers & Drive Revenue

11|29|16   |     |   (0) comments


Mobile revenues are declining. Digicel, a player in the Caribbean telecommunications/entertainment space, has found a new way to engage customers and drive revenue. John Quinn, CTO of Digicel, shared with us its story at Ultra-broadband Forum (UBBF2016)
LRTV Custom TV
Do You Really Need Gigabit Infrastructure?

11|29|16   |     |   (0) comments


Altibox is the biggest fiber-to-the-home (FTTH) player and the largest provider of video and TV in Norway. They started out with zero customers in 2002. Now they have close to half a million households and companies attached to their FTTH business. Nils Arne, CEO of Altibox shared with us their story and insight on 5G at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
BTís Openreach Strategy & Its Updates in 2016

11|29|16   |     |   (0) comments


A lot of developments at Openreach this year in terms of strategy and planned investments. Peter Bell, CIO of Openreach BT, shared with us the updates of Openreach at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
ITU: The Broadband Is Our Future

11|29|16   |     |   (0) comments


At Ultra-broadband Forum, Houlin Zhao, Secretary General of ITU, discussed how important it is for countries, companies and everybody to be working together to help to build the broadband and digital economies (UBBF2016).
LRTV Custom TV
Tackling 5G in Dallas

11|28|16   |     |   (0) comments


Here are our highlights of the 5G North America show in Dallas, Texas with Light Reading's Dan Jones.
LRTV Interviews
Cox Prepping for Virtualization Trials

11|14|16   |     |   (0) comments


In this video interview, Cox's Jeff Finkelstein discusses MSO's plans to test managed business services in early 2017 and tackle Distributed Access Architectures.
Upcoming Live Events
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Cable Nodes Becoming a Choke Point
Brian Santo, Senior editor, Test & Measurement / Components, Light Reading, 12/5/2016
WiCipedia: After-School Coding, Salary Probing & Pro-Parenthood Companies
Eryn Leavens, Special Features & Copy Editor, 12/2/2016
Consolidated Snaps Up Fairpoint for $1.5B
Iain Morris, News Editor, 12/5/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
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.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Animals with Phones
Live Digital Audio

Even when there's a strong pipeline of female talent in the comms industry, it tends to leak all the way to the top. McKinsey & Company says women experience pipeline leakage at three primary points: being unable to enter, being stuck in the middle or being locked out of the top. Each pipeline pain point presents its own challenges, but also opportunities to stop the leak. Wireless operator Sprint is making a conscious effort to improve its own pipeline from new recruits to the C-suite, and it wants the rest of the industry to do the same. In this Women in Comms radio show, WiC Board Member and Sprint Vice President of Enterprise Sales Nelly Pitocco will give us her take on the industry's pipeline challenges. Pitocco, who joined Sprint in May and has spent 20 years in the comms industry, will also offer solutions, share how Sprint is tackling the challenge within its own organization and take your questions live on air.