Cisco revenues up 4 percent but outlook is flat as diversification fails to offset switching unit fall
Revenues at Cisco jumped by four percent to $12.7 billion (£8.34bn) for the first quarter of its 2016 financial year, but the company has warned income could be flat during the next quarter.
The networking giant’s switching products remain the biggest income earner as sales increased by five percent to $4 billion (£2.63bn), while collaboration revenues rose by 17 percent to $1.2 billion (£790m) and data centre income increased by 24 percent to $859 million (£564m).
However there will be concerns about the performance of the NGN Routing unit, sales in which fell by eight percent to $1.8 billion (£1.2bn).
While Cisco is likely to be encouraged by gains in other parts of the business as it seeks to diversify from networking to other enterprise IT services, such as converged infrastructure, analytics and security, investors might be concerned if its bread and butter businesses stop growing. The company expects revenue to increase between 0 and 2 percent in the next quarter.
“Q1 was a very strong quarter. We are accelerating our ability to deliver on growth opportunities, aggressively driving our cloud business, and delivering continued strength in our deferred product revenue, as we sell more of our portfolio in software and cloud models,” said Chuck Robbins, Cisco CEO, who replaced the long-serving John Chambers earlier this year.
“We guided to solid growth in Q2. Our guidance reflects lower than expected order growth in Q1, driven largely by the uncertainty of the macro environment and currency impacts. Despite these headwinds, I believe we are executing very well. We are moving very fast to capture new opportunities and I feel good about how we are positioned for the second half of the year.”
Earlier this week, Cisco and Ericsson announced a wide-ranging partnership that will see the two firms sell each other’s products and co-develop networking and technologies as they seek to take advantage of demand for the Internet of Things (IoT).
Other recent acquisitions include OpenDNS, while the firm has also sold its connected devices unit to Technicolor for £388 million, and scrapped its unprofitable flash storage array line just two years after it was launched following the £268 million acquisition of Whiptail.
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