Cisco's Chambers expects service provider capex to decline in 2015

Cisco may have seen an uptick in its switching portfolio during its second-quarter earnings period, but CEO John Chambers foresees a challenging environment in the service provider market going forward.

"With the global macro changes and headwinds like net neutrality and industry consolidation, we expect this business to be challenged going forward, but we believe we are taking market share and will continue to take market share," Chambers told investors during the earnings call, according to a Seeking Alpha transcript.

Overall service provider revenue declines were not as dire as expected as revenues only declined 1 percent year-over-year in fiscal year second-quarter 2015. One of the key problem areas was the service provider video segment, which declined 19 percent year-over-year to $776 million.

One bright spot in its portfolio was its switching segment, which grew 11 percent due to strength in its Nexus Application Centric Infrastructure portfolio--Cisco's SDN architecture--including the Nexus 3000 and 9000 switches.

The switching business brought in about 39 percent of Cisco's total hardware revenue in 2014, while the router business accounted for about 21.2 percent of total revenues.

Despite negative outlook on the service provider market, Chambers told Bloomberg Television that the company is heading into a new growth curve. "We are back to growing again," Chambers said in an interview with Bloomberg on Thursday. "We are managing a tough environment."

Overall revenue rose 7 percent to $11.94 billion. This beat analysts' expectations of of 51 cents per share on revenue of $11.8 billion.

Shares of Cisco were trading at $29.44, up $2.51 or 9.32 percent, in late-morning Thursday trading on the Nasdaq stock exchange.

For more:
- see the earnings release
- Bloomberg has this article
- Reuters has this article

Special Report: Wireline telecom earnings in the fourth quarter of 2014

Related articles:
Cisco commits $1B to build Intercloud network, adds 30 new partners
Cisco's grip on service-provider routing, carrier Ethernet slips to 41 percent
Cisco to ax 6,000 jobs due to sluggish emerging markets, routing sales

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