Cisco's Q3 switching, routing revenues dip on softer service provider spending

Cisco is seeing the effects of its service provider customers' cautious spending habits as third-quarter sales in its switching and routing division sales slid 3 percent and 5 percent to $3.45 billion and $1.9 billion, respectively.

Chuck Robbins, Cisco's CEO, told investors during its third quarter call that service provider customers had delayed spending on new network equipment, particularly in the core.  

"Clearly there is a macro issue that we are dealing with," Robbins said during the earnings call, according to a Seeking Alpha transcript. "We also saw again as you heard from some of our peers we saw some increased caution in the service provider space. We saw slow movement in the core of those networks."  

Cisco wasn't the only routing company to see soft service provider sales.

Juniper reported in its first quarter earnings call that product revenue remained flat year-over-year and down 22 percent at $504 million as cloud and cable provider growth was offset by a decline in telecom.  

Robbins said that Cisco will introduce a number of new products that are being tested by large carriers that could put these segments back onto a growth path.

"We do have a number of new platforms that are in certification with several of the key players that at some point in the coming quarters we would expect those two to begin to show up favorably but that's what we see right now," Robbins said.

Despite the slow growth in routing and switching, Cisco reported that its security, collaboration and service provider video segments continued to show double-digit growth. Security rose 17 percent to $482 million, while collaboration and SP Video rose 10 percent and 18 percent to $1.07 million and $468 million, respectively.

From an overall financial perspective, Cisco reported total revenues of $12 billion, up 3 percent year-over-year excluding the sale of its set-top box business.

Robbins said the financial results were in line with its guidance and a "strong performance in a challenging environment."

For more:
- see the earnings release
- here's the Seeking Alpha earnings transcript (sub. req.)

Special report: Verizon, Frontier transition: Wireline earnings in Q1 2016

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