Cisco's Cable Sales Shrink 2% In July Quarter

Vendor Cites Lower CMTS Shipments for Decline

Cisco Systems' Service Provider Video Technology Group generated $962 million in sales for the quarter ended July 28, down 2% from the year-ago period, with the company citing lower CMTS shipments in part for the decline.

For the company's fiscal year ended in July, the company's service provider video revenue was $3.9 billion, up 11% year over year.

Cisco chairman and CEO John Chambers noted that the quarterly decline in the cable-focused business unit came after three consecutive quarters of double-digit growth. Lower cable modem termination system shipments were partially offset by growth in IP set-top boxes and cable modems, he said.

Cisco's $5 billion acquisition of NDS, which closed July 31, will accelerate the company's shift toward a more software-centric model for video service providers, Chambers said.

"As we began to think about this market move into the 'cloud,' we see more software content and potentially more profitable growth opportunities," he said.

Overall, Cisco reported quarterly net sales of $11.7 billion, up 4.4% year over year, and net income of $1.9 billion (36 cents per share), an increase of 15.1% from the year-prior period.

For the current quarter, Cisco anticipates NDS revenue will be approximately $200 million. Cisco forecast revenue growth for the period ending in late October to be in the range of 4% to 6% year over year; excluding NDS, Cisco projects fiscal Q1 2013 revenue growth to be 2% to 4% year over year.

Excluding certain items, Cisco forecast fiscal Q1 earnings per share to be in the range of 45 cents to 47 cents, up approximately 5% to 9% year over year. Cisco expects GAAP earnings for Q1 to be 9 cents to 13 cents per share lower than that, which includes typical adjustments and up to 2 cents per share resulting from layoff-related charges.

Cisco stock closed up 9.6% Thursday, to $19.02 per share.

Raymond James analyst Simon Leopold, in a note Thursday morning, said he expected Cisco investors to react positively given that the quarterly results were at the high end of forecasts, while the company reiterated its Q1 outlook and announced an unexpected dividend increase. Leopold maintained his "outperform" rating on Cisco.

"Although Europe and the federal vertical remain weak, the overall tone sounded more positive than we expected," Leopold said.

Among notable customer wins during the quarter, Cisco called out a deal with Bright House Networks to offer managed-security services to business customers.