Cisco Provides Negative Revenue Guidance for 2Q17

 Cisco CEO remains optimistic that under President-Elect Trump the economy will improve.

By Sean Michael Kerner | Posted Nov 17, 2016
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Cisco Systems reported its first quarter fiscal 2017 earnings after the market close today, showing growing momentum in the company's security business, though the overall outlook for the next quarter isn't entirely positive.

For the quarter, Cisco reported revenue of $12.1 billion, for a one percent year-over-year gain. Net income was reported at $2.3 billion, for a 4 percent decline from the first quarter of Cisco's fiscal 2016.

Looking forward, Cisco provided revenue guidance that isn't all that optimistic. Cisco expects revenue for the second quarter of fiscal 2017 to decline in the range of minus 2 percent to minus 4 percent year-over-year.

"I think if you just look at our guidance let me be clear, it's predominantly the SP (Service Provider) weakness and the overall CapEx challenges that we’ve seen in SP and that business is large account driven," Cisco CEO Chuck Robbins said during his company's earnings call. "Right now I think there are unique set of characteristics particularly in SP space and you have the overarching macro uncertainty in the economy."

Among the issues fueling overall macro-economic uncertainty was the recent U.S. elections. Robbins isn't worried about the elections anymore and he's optimistic about the president-elect.

"Post-election, most CEOs that I talk to are pragmatic about the result and now we are all focused on the policy issues that matter to each of our companies," Robbins said. "I think that President-elect Trump appears to be very business-oriented and is very focused on driving the US economy and anytime the US economy improves, that’s certainly good for us."

Looking at Cisco's business during the first quarter, there was a seven percent decline in switching revenue, led largely by weakness in Cisco's campus switching business. Cisco's data center revenues declined by 3 percent, due to the market shift from blade to rack-mounted servers. The wireless networking business declined by two percent, due to weakness in demand for wireless controllers.

On a positive note, Cisco's security business is leading growth at the networking vendor. 


"Our security revenue grew 11 percent, marking the 4th consecutive quarter of double-digit growth," Robbins said. "Our competitive position in security is growing stronger as our integrated architecture approach and best-of-breed portfolio resonates with our customers."

Sean Michael Kerner is a senior editor at Enterprise Networking Planet and InternetNews.com. Follow him on Twitter @TechJournalist

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