Cisco revenue dips 1% as it struggles to sell main networking products

Cisco revenue in Q3 fiscal 2017Business technology major Cisco has posted revenue of $11.9 billion (–1 percent) and net income of $3 billion (+5 percent) in the third quarter of fiscal 2017 as the company  is struggling to sell its main networking products.

Cisco said its product revenue was flat, while service revenue fell 2 percent.

Cisco’s revenue growth was flat in America with revenue of $7.04 billion. $2.99 billion was the Cisco revenue in EMEA. Cisco’s revenue in Asia Pacific including Japan, China and India fell 2 percent to $1.89 billion.

Cisco achieved growth in select networking product categories: Wireless (+13 percent), Security (+9 percent) and Switching (+2 percent). The decline in revenue was in segments such as NGN Routing (–2 percent), Collaboration (–4 percent), Data Center (–5 percent), and Service Provider Video (–30 percent).

Product gross margin fell to 63 percent from 63.8 percent in the third quarter of fiscal 2016 primarily due to pricing, a supplier component remediation adjustment in the third quarter of fiscal 2016, and product mix, partially offset by continued productivity improvements.

“The Network is becoming even more critical to business success as our customers add billions of new connections to their enterprises. We are laser focused on delivering unparalleled value through highly secure, software-defined, automated and intelligent infrastructure,” said Chuck Robbins, CEO of Cisco.

Cisco acquisitions

Cisco completed its acquisition of AppDynamics. Cisco announced its deals for Viptela, a software-defined wide area network company; Saggezza’s analytics business; indMeld, an artificial intelligence (AI) company.

Cisco’s services revenue

Cisco’s services revenue fell 2.2 percent for the first time since Q1 2003 as the networking company transitions to a software- and subscription-based model. The decline was partially attributed to the previous year ago quarter having 14 weeks vs. 13 weeks this year.

“However, growth in deferred services revenue (6.8 percent YTY) shows Cisco is beginning to benefit from its investments in analytics, security and software-based services and create future recurring revenue streams,” said Kelly Lesiczka, research analyst at Technology Business Review.

In February Cisco launched Cisco Umbrella for Service Providers, an extension of its Cisco Umbrella security service which integrates cloud security to improve secure cloud, network and device environments. During the quarter Cisco opened a Security & Trust Office (S&TO) in Germany and a Cyber Range Lab in India to appeal to demand for security services.