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Service Providers Help Push Cisco's Q4 Downward

It wasn't entirely about service providers, but a 10% drop in sales from that sector contributed to Cisco's seventh consecutive quarter of declining revenues.

It's partly the result of the company's transition into subscription-based sales. Help is on the way in the form of the intuitive network, represented by the Catalyst 9000 series of enterprise switches.

In the meantime, revenues appear primed to continue sliding. During the fourth quarter, Enterprise bookings were down 1% from the previous year, while service provider bookings were down 7%, officials said during today's earnings call.

Cisco Systems Inc. (Nasdaq: CSCO) CEO Chuck Robbins wasn't willing to pin the service-provider situation on any single problem. Rather, certain carriers are cutting spending due to sporadic factors such as mergers or new regulations.

"It really is more a customer variability issue than it is a single place in the network infrastructure that is causing a problem That's what we have seen for several quarters," he said on the call.

For its fourth quarter, which ended July 29, Cisco reported revenues of $12.1 billion and net income of $2.4 billion, or 48 cents per share. For the same quarter a year ago, Cisco reported revenues of $12.6 billion and net income of $2.8 billion, or 56 cents per share.

Non-GAAP earnings of 61 cents per share matched analysts' expectations, according to Thomson Financial. That's not actually good news, as Cisco tends to beat the earnings forecast by a penny or two.

Enter the 'Network Intuitive'
Cisco's big hope in networking, where routing and switching revenues both decreased 9% compared with a year ago, is in the intuitive network. Robbins boasted that 200 customers have signed on for the Catalyst 9000 switches, which are the first products built for Cisco's new wave of intent-based networking.

The Catalyst 9000s were announced in June, although quite a few customers had their hands on early versions of the products by then. It's also worth noting that the 9000 series is the next generation of Catalyst switches; anyone craving the very newest Catalyst hardware will end up buying a 9000 series.

The transition is affecting Cisco's top line in two ways. First, any new-product introduction causes customers to waffle about their next purchases; hence, some of the 9% decline in switching sales can be attributed to the Catalyst 9000s.

Second, the new products are part of Cisco's transition to subscription-based revenues. In the fourth quarter, Cisco recorded $5 billion in deferred-product revenues related to software and subscriptions, a figure that's doubled compared with a year ago, Robbins said.

For more about Cisco's intuitive network, see these stories on Enterprise Cloud News:

— Craig Matsumoto, Editor-in-Chief, Light Reading

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