Cisco shrinking overall ~2% per quarter (fifth straight down quarter). 10% down in routing, 5% down in switching, 4% down in DC. Increases dividend, investors happy.
Cisco reported $11.6 billion in revenue for Q2 2017 on February 15, 2017, a 2% YoY decrease, but in line with guidance of a 2-4% YoY decline.
Product, $8.49B (down 5.5%); Service, $3.09B (up 4.9%).
Switching, $3.31B (down 5%); NGN Routing, $1.82B (down 10%); Collaboration, $1.06B (up 4%); Data Center, $790M (down 4%); Wireless, $632M (up 3%); Security, $528M (up 14%); Service provider video, $241M (down 41%); other, $116M (up 53%
“Cash” of $71.8 billion at the end of Q2 2017, with only $9.6 billion in the US. The introduction of a Corporate Tax Holiday could have huge positive ramifications for Cisco.
The Q3 2017 outlook calls for revenue to decline by 2% or to remain flat YoY.
Total product revenue was down 4% and let me walk through each of the product areas. Switching declined 5%, driven by weakness in Campus partially offset by strength in the ACI portfolio, which was up 28%
Cisco ACI is holding up switching revenue but Campus declines are greater. (I continue to think that ACI growth is slower than competitors e.g. NSX and not what Cisco had hoped for)
Across our next-generation data center portfolio, we saw healthy customer traction, including our ACI data center switching portfolio grew revenue by 28%. This includes 1,300 new Nexus 9000 customers and 450 new ACI customers in Q2.
It would seem that people are buying Nexus 9000 with 30% takeup rate on ACI functions.
Chuck Robbins: Wireless grew 3%, with ongoing strength in Meraki and the continued ramp of our 11ac Wave 2 portfolio. Security grew 14% with deferred revenue growth of 45%, as we offer more solutions to customers with increasing software content that result in greater recurring revenue. We had very strong performance in our advanced threat security of 65% as well as strength in unified threat management and web security solutions.
The Etherealmind View
Cisco is shrinking at a reasonable rate and management have the decline under control. The transition to cheaper switch and routing products like the Nexus 9000 is well under way while attempts to sell software as a service like ACI & Meraki are modest.
The decline in routing seems largely due to service providers who are holding back spending as they work out their SDN/NFV strategy.
Cisco is increasing dividends making it attractive to investors. Many are hopeful that Cisco can turn around the shrinking business over time probably through acquisition.
Link: Cisco Systems (CSCO) Q2 2017 Results – Earnings Call Transcript | Seeking Alpha – http://seekingalpha.com/article/4046482-cisco-systems-csco-q2-2017-results-earnings-call-transcript?part=single