Cisco checks slide in service provider segment
Cisco's net income and revenue slipped in its fiscal third quarter, but the results topped Wall Street expectations and its shares rose in aftermarket trading. Cisco's net income and revenue both declined by smaller amounts than they did in the second quarter.
The company’s financials in the service provider market have been slipping, but it seemed to be slowing the downward slide. Its Q3 decline in orders was 5 percent year over year, an improvement compared to its Q2 decline of 12 percent.
Analyst Brian Coyne of National Alliance Securities noted, however, that service provider video orders declined 11 percent YOY, and revenue declined 26 percent.
“This still looks like share loss in CPE as CSCO’s results and outlook stand in contrast to a variety of competitors’ outlooks and stable to rising SP capex,” Coyne wrote.
He also noted that Videoscape, the former NDS cloud video platform that Cisco consistently touted in 2013, again didn’t merit a mention on the company’s call with analysts, which Coyne said reflects the de-emphasis of this business after CSCO slashed its workforce in Israel last fall.
The pressure in CPE is coming from Arris and Pace.
Cisco’s Wi-Fi infrastructure business is thriving, meanwhile, due in large part to sales of small-cell equipment to wireless carriers.
Shares of Cisco Systems Inc. rose $1.60, or 7 percent, to $24.41 in aftermarket trading following the release of the earnings report.
Cisco said its third-quarter net income declined 12 percent to $2.18 billion, or 42 cents per share, from $2.48 billion, or 46 cents per share. If one-time items are excluded, the company said its net income was unchanged at 51 cents per share. Revenue fell 5.5 percent, to $11.55 billion from $12.22 billion. The company said it made progress toward returning to growth.
Analysts expected net income of 48 cents per share and $11.36 billion in revenue, according to FactSet.
The San Jose company said product revenue fell 8 percent to $8.82 billion and service revenue grew 3 percent to $2.73 billion.
Cisco's performance is widely regarded as a bellwether for the technology industry because the company cuts a broad swath, selling routers, switches, software and services to corporate customers and government agencies. Its fiscal quarters also end a month later than most other major technology companies, which gives Cisco more time to assess economic conditions. Its fiscal third quarter ended on April 26.
Cisco stock fell 5 cents to $22.81 during the regular trading session.
-- The Associated Press contributed to this story