Cisco Offers Softer Switch, Router Sales

The company's fundamental businesses suddenly cooled off in Q2. That's going to raise some questions

Craig Matsumoto, Editor-in-Chief, Light Reading

February 9, 2011

1 Min Read
Cisco Offers Softer Switch, Router Sales

In announcing second-quarter earnings Wednesday, Cisco Systems Inc. (Nasdaq: CSCO) gave some surprisingly low numbers in switches and routers, its primary markets. That surprise may have caused the stock to slip; Cisco shares were down $2.18 (9.9%) to $19.86 in after-hours trading.

Cisco's switching revenues declined 7 percent compared with last year's second quarter, and its router revenues grew 4 percent.

Why this matters
Following its November earnings, investors began to grow suspicious of Cisco and its growth prospects in mature markets. There is a perception that it is losing market share, and now the naysayers have some evidence that not all is well.

That's particularly true in switching. Cisco keeps saying Nexus sales are going well, but the transition from Catalyst switches to Nexus is going "faster than we expected, especially in terms of the ramp of the new products," CEO John Chambers said on Wednesday's earnings call.

In a research note last week, analyst Mark Sue of RBC Capital Markets wrote that while Cisco is still beating the competition consistently, "competitive pricing is shrinking deal sizes, implying there may be minimal revenue growth in switching this year where Cisco is dominant."

For more
A look at Cisco's finances during the past 12 months:

  • Is Cisco Spread Too Thinly?

  • Is Cisco's Q1 Contagious?

  • Cisco Q4 Hides a Frown

  • Cisco Q3: Best. Quarter. Ever.

— Craig Matsumoto, West Coast Editor, Light Reading

About the Author(s)

Craig Matsumoto

Editor-in-Chief, Light Reading

Yes, THAT Craig Matsumoto – who used to be at Light Reading from 2002 until 2013 and then went away and did other stuff and now HE'S BACK! As Editor-in-Chief. Go Craig!!

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