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Cisco Revenue Down 19% in Europe

Craig Matsumoto
News Analysis
Craig Matsumoto
11/13/2012
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Europe was a sore spot for Cisco Systems Inc. (Nasdaq: CSCO) in the company's first quarter and will "get worse before it gets better," CEO John Chambers said on Tuesday's earnings call.

It's the one blemish on an otherwise sunny outlook, as Cisco saw business recovering in other geographies and most of its business segments. (See Cisco Nets $2.1B in a Predictable Q1.)

Cisco's revenues from European service providers were down 19 percent compared with last year's first quarter, Chambers said. (Cisco's first quarter ends in October.)

Cisco's revenues from U.S. service providers were up 13 percent from a year ago. But worldwide, the company's service-provider sales were up only 3 percent.

Most other categories saw growth for Cisco, especially the U.S. enterprise market, which was up 9 percent. The big downer was the U.S. federal market, which dipped 15 percent in the first quarter, compared with the same quarter a year ago. Cisco expected that one, though, Chambers said.

Overall, Cisco expects revenues for its second quarter, which ends in January, to be $11.93 billion to $12.16 billion. The midpoint of that range would be $12.05 billion, which is just better than the $12.02 billion that analysts were expecting, according to Thomson Reuters .

Separately, Chambers made a sidelong reference to the increasing friction between the U.S. and China, noting that Cisco still counts China as a buddy. "We have invested a lot of resources and innovation in China for the last 20 years, and our commitment to China has not diminished in any way," he said. (See China Lashes Out at 'Cold War Mentality', Cisco Feels Security Heat in China and US vs Huawei/ZTE: The Verdict.)

— Craig Matsumoto, Managing Editor, Light Reading

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Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:17:44 PM
re: Cisco Revenue Down 19% in Europe


Sigint -- It's a lack of money. Budget cuts, budget freezes.

sigint
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sigint,
User Rank: Light Beer
12/5/2012 | 5:17:44 PM
re: Cisco Revenue Down 19% in Europe


"The US federal sector was also way off, down 15% year over year, but everyone was pretty much expecting that."


________________________________________________________________


 


Could you please elaborate on factors dampening federal sector sales? 

Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:17:44 PM
re: Cisco Revenue Down 19% in Europe


One thing that seemed to bug analysts on the call was Cisco's gross margins, which have improved but are due to dip back next quarter (to 61-62%, vs. 62.7% in Q1).  Cisco's explanation was that it had to do with the mix of sales.


The US federal sector was also way off, down 15% year over year, but everyone was pretty much expecting that.

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