Cisco remains confident that despite a near-term decline in service provider sales, the industry segment is showing signs of revenue improvement.
Chuck Robbins, CEO of Cisco, told investors during its second quarter fiscal year 2017 earnings call that what affects the service provider segment sales are the different buying patterns by its largest carrier customers.
“Different service providers are looking at different areas of investment depending on what's going on in their network,” Robbins said during the earnings call, according to a Seeking Alpha earnings transcript. “You have some who are looking at macro radio densification as an example and others are looking at building out capacity in the core.”
Robbins added that every quarter “any number of customers that make any sort of shift in their buying behavior can have an impact either positively or negatively.”
However compelling Robbins’ thesis is for the long term, the reality is that slow demand for switching and routers drove a 1% decline in the service provider business segment.
The vendor reported that from a regional perspective, the Americas region was strong.
However, gains in the Americas were offset by what Robbins said was “general weakness” in Europe and China. EMEA remained flat at $3.06 billion, while Asia Pacific declined 3% to $1.9 billion.
Here’s a breakdown of the company’s key metrics:
- Switching: Cisco’s second quarter Switching revenues declined 5% to $3.31 billion.
- NGN Routing: Similar to Switching, NGN Routing revenues declined 10% to 1.82 billion.
- Data Center: While Data Center is a growing segment for Cisco, the segment declined 4% to $790 million in the second quarter.
- Security: Security was a clear bright spot in Cisco’s earnings mix, rising 14% to $528 million. Cisco noted that deployments of its advanced threat solutions continue to be strong. During the quarter, the vendor added over 6,000 new customers, bringing the total to about 29,000.
- Financials: Second quarter revenue was $11.6 billion, down 2% year-over-year. Cisco previously gave guidance of a 2-4% decline.
Taking out some items, Cisco earned 57 cents per share beating the average analyst estimate by one cent, according to analysts polled by Thomson Reuters I/B/E/S.
Looking towards the third quarter, Cisco expects revenue in the range of minus 2% to 0% year-over-year.