& 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 Huawei Video Resource Center
Frost & Sullivan's Jonas Zelba on Going Beyond Connectivity

2|27|17   |     |   (0) comments


Telecom operators across the globe are trying to understand what can they offer beyond connectivity. Operators are already introducing new and innovative services but they are faced with challenges due to unclear business models. Jonas highlights that no one operator can offer all the services itself. Operators in the Middle East should look within their ecosystem ...
LRTV Huawei Video Resource Center
IDC's Paul Black on Cloudification

2|27|17   |     |   (0) comments


Paul Black from IDC shares his insights on how cloudification is expected to combile all aspects of digital transformation.
LRTV Huawei Video Resource Center
Industry Expert Michael Howard Talks About Cloud Native

2|27|17   |     |   (0) comments


Cloud Native is a really nice term and a lot of people are using it. But most of them have their own definition of what Cloud Native means. Michael Howard offers his take on the terminology.
LRTV Custom TV
4.5G Evolution: Peter Zhou on Advanced MIMO Technologies & 5G Business Prep

2|25|17   |     |   (0) comments


In the process of service transformation, operators need to catch three major opportunities and start deploying in 4.5G networks, such as video, household broadband access and digital transformation of vertical industries. 5G is coming. Operators don't need to wait for it to happen but should progressively deploy 4.5G networks by introducing 5G-oriented ...
LRTV Custom TV
What WTTX Can Deliver

2|23|17   |     |   (0) comments


Mohamed Madkour explains the benefits of WTTX while Dimitris Mavrakis discusses the challenges of delivering home broadband access.
LRTV Custom TV
Huawei on Mobile Broadband

2|23|17   |     |   (0) comments


Mohamed Madkour shares his vision on MBB for the next three years.
LRTV Custom TV
Analysys Mason Talks About the Future of Digital Operations

2|23|17   |     |   (0) comments


The future of digital operations has three key aspects: 1. Highly automated operations for both service and network; 2. Highly converged BSS/OSS for business and resources; 3. Highly merged management and control for real-time cloud native operations.
LRTV Interviews
Software Trends in the Telecom Sector

2|23|17   |   03:40   |   (0) comments


Heavy Reading senior analyst James Crawshaw talks with Telecoms.com Editorial Director Scott Bicheno about trends and developments in the telecoms software sector and what to expect at MWC 2017.
LRTV Custom TV
Huawei's Pre-MWC Analyst Briefing 2017 Highlights

2|22|17   |     |   (0) comments


Huawei shares its vision for this year's MWC.
LRTV Interviews
MWC17: 5G, Cloud RAN & More

2|21|17   |   04:35   |   (0) comments


Ovum Senior Analyst Julian Bright talks to Scott Bicheno from Telecoms.com about all things MWC, including Cloud RAN, Huawei's pitch to the industry and the road to 5G.
LRTV Interviews
MWC 2017's Key 2-Letter Terms

2|20|17   |   08:29   |   (1) comment


5G, AI, VR... these are just some of the two-letter terms that will dominate show-floor chat at MWC 2017 in Barcelona, according to these two blow-hards (a.k.a. Scott Bicheno of Telecoms.com and Light Reading's Ray Le Maistre). And then there's PB...
LRTV Interviews
Key Trends for Mobile Operators in Developing Markets

2|20|17   |   06:37   |   (0) comments


Ovum's Matthew Reed talks to Scott Bicheno from Telecoms.com about the challenges and opportunities facing mobile operators in the developing markets of Africa and the Middle East.
Upcoming Live Events
March 21-22, 2017, The Curtis Hotel, Denver, CO
March 22, 2017, The Curtis Hotel, Denver, CO
March 22, 2017, The Curtis Hotel, Denver, CO
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Uber's HR Nightmare: Company Investigates Sexual Harassment Claims
Sarah Thomas, Director, Women in Comms, 2/21/2017
Broadband Has a Problem on the Pole
Mari Silbey, Senior Editor, Cable/Video, 2/21/2017
Verizon to Start Fixed 5G Customer Trials in April
Dan Jones, Mobile Editor, 2/22/2017
Cloud Rains on HPE Earnings
Mitch Wagner, Editor, Enterprise Cloud, 2/24/2017
Verizon Fixed 5G Tests to Top 3Gbit/s?
Dan Jones, Mobile Editor, 2/23/2017
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
No One Likes This Click Here
Take a hint!
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.