Cisco Systems turned in a better-than-expected fiscal second quarter Wednesday, this despite continued struggles in its service provider segment, particularly in the area of video.
For the quarter, Cisco posted earnings of 53 cents per share on revenues of $11.94 billion, up 7% year-over-year. Analysts were expecting earnings of 51 cents on revenues of $11.8 billion, according to Reuters. Cisco shares were up $2.03 (7.54%) to $28.96 each in pre-market trading Thursday.
While segments such as data center and wireless each grew (up 40% and 18%, respectively), service provider-facing revenue was essentially flat – down 1%-- but marked a significant improvement versus quarters. Service provider video revenues, at $776 million, were down 19% in the quarter.
Despite that dip, John Chambers, Cisco’s chairman and CEO, was confident about its future service provider video prospects, noting on Wednesday’s earnings call that Cisco had notched “key partnership wins to develop next-generation end-to-end video solutions from the set-top box to the cloud,” a reference that would seemingly include Cisco’s revised role with Charter Communications as the MSO prepares to roll out its new IP-connected “Worldbox” and its cloud-based user interface.
But Chambers does not see Cisco turning that corner for a while. With respect to the service provider segment as well as emerging markets, Cisco’s not modeling for a growth spurt in those areas for “several quarters,” he explained.
“My premise on service providers is you are going to see negative growth in terms of capex for this year, with a lot of the experts saying it’s actually going to be uglier in the next six months than it will at the back half of the year,” Chambers said. “Our assumption is any gain in service providers will be share wallet gain and market share gains.”
Cisco, he added, is “winning big service provider deals that we would not even have been in the game in a year or two ago.”
From a broader standpoint, Cisco is growing in the wake of a major reorganization that included a reassembling of 70% of its engineering capabilities.
“We are executing well and growing at a healthy pace in a tough environment,” Chambers said. “We could not be better positioned in the market.”
Cisco expects revenue growth in the range of 3% to 5% in its fiscal third quarter, with non-GAAP revenues per share of 51 cents to 53 cents.