Cisco expects drop in revenue next quarter due to China business

Cisco reported revenue of $13.2 billion (+2 percent) and net income of $2.9 billion in first quarter that ended October 26, 2019.
Cisco MWC 2018 BarcelonaCisco completed the divestiture of the Service Provider Video Software Solutions (SPVSS) business in the second quarter of fiscal 2019 on October 28, 2018.

Cisco CEO Chuck Robbins said: “We’re focused on continuing to drive innovation, transform our business and exceed our customers’ expectations.”

Cisco said it expects 3-5 drop in revenue during the second quarter. Cisco is one of the top suppliers of telecom equipment to mobile operators.

The enterprise networking company is facing huge challenge in China in the wake of the US-China trade war. China revenue for Cisco fell 31 percent as compared with the previous quarter.

Cisco revenue was $13.2 billion, up 2 percent, with product revenue up 1 percent and service revenue up 4 percent. Revenue by geographic segment was: Americas up 4 percent to $7.977 billion, EMEA up 4 percent to $3.283 billion, and Asia Pacific including India, Japan and China down 8 percent to $1.899 billion.

Product revenue was led by growth in Security, up 22 percent and Applications, up 6 percent. Infrastructure Platforms was down 1 percent.

Cisco’s product revenue rose 1 percent to $9.9 billion. Infrastructure platform dipped 1 percent.

Cisco said all of the businesses were up except for routing. Routing declined due to weakness in service provider.

Switching had growth in both campus and data center with the continued ramp of the Cat9K and strength of the Nexus 9K.

Wireless grew driven by Meraki. Data center had solid growth, led by HyperFlex. Cisco said its public sector business rose 6 percent, enterprise and commercial fell 5 percent and service provider was down 13 percent.

Cisco CFO Kelly Kramer said: “With software subscriptions at 71 percent of our software revenue, we are making good progress in transforming our business model.”

Chuck Robbins said: “Because of key decisions we made four years ago to change our business model, we remain well positioned to capitalize on the tremendous opportunities across cloud, automation, 5G, security and collaboration.”