Cisco Under Siege

August 14th, 2014 by · 13 Comments

John Chambers doesn’t seem to be having as much fun as he used to, at least if Cisco’s earnings report is any indication. While the company met or beat expectations for its fiscal Q4, the news otherwise couldn’t have been fun to read.

Emerging markets were definitely under siege, at least in part to the changing post-Snowden environment. As the largest US vendor with the most public face, Cisco has been taking the brunt of the buy-non-American movement overseas. China revenues were down 23%, but Brazil wasn’t far behind down 13% with other emerging markets also lagging. Cisco doesn’t expect those numbers to rebound anytime soon either.

As many expected, there is another round of layoffs. Some 6,000 employees, or 8%, will be looking for alternatives over the next few months. They did the same sort of thing last summer, and it looks like folks expect next year to stay on the same trend. While emerging markets trends didn’t help, it’s more part of an overall trend away from expensive boxes and toward software (e.g. SDN) by Cisco’s customers that is forcing them to evolve.

That being said, the gloom was largely expected.  Overall, Cisco’s $12.4B revenue managed to hold flat over the same period last year. Non-GAAP earnings of $0.55 was actually a couple pennies better than anticipated. Guidance for Q4 was for $12.1-12.2B in revenue, which was generally as expected if tepid.

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Categories: Financials · Telecom Equipment

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13 Comments So Far

  • Solace says:

    The whole Snowden after-effect thing just still strikes me as such childish propaganda. Not buying American routers because of it? They’re all made in China one way or another anyway, so is that where we all say we want to buy from…? Or if only you avoid a Cisco, everything will be kept from prying eyes? Or there aren’t any European spy agencies doing similar stuff? I have a bridge to sell you.

    The reason for slumping revenue is much simpler than that: network revenue is compressing fast, and no one wants to pay for it anymore, so providers buy less gear to replace old. That trend will continue for the foreseeable future, short of a revolution in how network is built and bought.

    The best path to that new method is probably some variation of open source and commoditization, whether we call it a web service or SDN or whatever buzz word.

    And therein lies another big Cisco problem. They’ve made an empire out of proprietary closed systems and lock-in, or buying a couple companies a day to get them out of the way rather than integrate and use their technology. God bless the day they are out of business for good.

  • Anonymous says:

    The Chinese government knows exactly which of the IT companies were most/least cul

    • Anonymous says:

      … culpable, and by and large have been impacted accordingly. Cisco has been the hardest hit. Let that be a lesson to companies that rely on global revenues whe considering how much to aid your national governments’ surveillance activities.

      • Anonymous says:

        Nice thought but:

        1- no evidence that Cisco actively participate (some of the cell companies did though), and anyway should be obvious a good surveillance program does not needs the cooperation of a manufacturer anyway
        2- we give much power over to our governments in all so-called Western progressive democracies with heavy regulation and contributions and their ownership and other oversight, a companies success is increasingly tied to how much you satisfy those overseers. They can ruin you fast if you do not. Don’t pretend that a USA problem

        Say it different, making buying and technology decisions based on political soapbox rather than actual needs and functionality is stupid. Agree with Solice above I don’t see that is the big problem to their revenue anyway. If you are in a company thats deciding based on what you saw on a BBC/CNN TV show, you should to be fired.

  • anonymous says:

    SDN has the potential of having a major impact on CPE manufacturers. Cisco has chosen the proprietary route and others are giving the concept elaborate lip service at this point. Juniper will be affected the same way. Try to get an answer from them as to how open their SDN architecture really is for example. By moving control away from the individual router into the network, users can acquire equipment at a lower cost. This can also affect core switching, etc. Users will benefit from other reason as well so the SDN movement will progress. More layoffs coming.

  • fanfare says:

    CSCO has been getting hammered by Huawei for years. China has gotten very good at copying technology and can produce products for less. Add to that the fact that there is huge growth in Asia re: infrastructure, and Asian companies are given the contracts.

    • Solace says:

      Yup. So if some dimwits are avoiding CSCO because of snowden (what logic…), what do you think a Chinese owned company is doing, and the consequences of information being in their hands?

      Anyway I should have known mentioning Snowden would end up being the sideshow instead of my point: that selling network sucks and so does Cisco.

      Right on time:

      Right. I look forward to the release of the open source IOS and access to the ASIC…

    • Anon says:

      The Chinese manufacturers have gone well beyond copying technology, they have a clear lead in certain technical areas and are really innovating quickly. This has been the case for at least the last three years, and the gap will widen in the next three.

  • mhammett says:

    Cisco is overpriced and underperforms. They also make FCC filings throwing an entire industry under the bus when only a couple in that industry did wrong. During their unnecessary bashing, they neglected to also mention AT&T and non-service providers that were equally guilty.

    Anyone that says they bought differently is just grandstanding.

    • anonymous says:

      With their arrogance, market power and position they remind me of IBM years ago. Everything was overpriced and underpowered. Their time will come soon and they will be looking for a savior, e.g. Gerstner. If Juniper gets real with their SDN offering they can overtake Cisco as the leader.

  • Crowe the Charlatan says:

    Arrogance can be an achilles heel of many companies…

  • Anonymous says:

    Jim Collins wrote a book, How the Might Fall. Starting to look like Cisco could make it into the next revision as prime example.

    You see, instead of adapting to market forces they kept their prices too high in the face of competition. So, yes they were able to milk customers who had to buy from, but customers remember that stuff. Now that the networking world is moving to open standards, with competitive prices, look for customers to become buyers from cisco competitors.

    Juniper is making big strides into the carrier backbone space where cisco used to have exclusive rule.

  • Anon says:

    Juniper is a basket case since it started listening to its activist investor. It started by organising into silos, then cutting R&D.

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