Large firms slam wallets shut in Cisco's Q3
Networking giant's "solid" quarter marred by drop in enterprise sales
Cisco suffered a drop in enterprise sales in its fiscal Q3 despite posting a solid seven per cent growth in total revenue.
Chief executive John Chambers (pictured) said the networking giant is continuing to see a "hesitant spending environment" among larger customers who are elongating the sales cycle and taking longer to sign off deals.
Despite this, the networking giant – which was forced to restructure its business last year after admitting it had "lost credibility" – reported a seven per cent rise in total revenue to $11.6bn (£7.2bn) in the three months ended 28 April, its second record revenue haul in as many quarters. Net profit shot up 20 per cent to $2.6bn.
Among the highlights were a 57 per cent boom in sales of its UCS server architecture, a 20 per cent rise in wireless sales and a nine per cent spike in security sales. Switching sales grew five per cent.
However, Chambers admitted Cisco's collaboration and video business is "not where we expect it to be" as sales came in flat. Telepresence sales were hit by weak enterprise spending.
"As you would expect, we are putting an aggressive action plan in place with specific focus on our sales execution," Chambers said of this product area in a conference call, which was transcribed by Seeking Alpha.
By customer segment, service provider grew five per cent, commercial increased eight per cent and public sector rose three per cent.
But enterprise sales fell one per cent and Chambers admitted larger firms are holding back on big deals. "We are seeing larger, longer sales cycles, more sign-off and smaller deal size," he said.
Chambers said Europe, along with the global economy, public sector, India and conservative IT spend, had been areas of concern for the past few quarters. Europe and customer conservatism have got worse, he said, with EMEA product orders flat during Q3.
"We have seen the issues of southern Europe expand. Central and northern Europe have their own set of challenges," he said.
Chambers used Cisco's recent partner summit to take a sideswipe at rivals and could no't resist sticking the boot into Juniper, Alcatel and Huawei once more on the call.
"Cisco's architectural approach has differentiated us within the service providers and allowed us to take wallet share on a global basis, especially when you consider some of our peers such as Juniper where their revenue declined in the most recent reported quarter by six per cent and over – a decline of over 20 per cent in routing in that quarter," he said.
"Huawei's SP business, as reported in their most recent documentation, was up almost three per cent year over year even though they are in emerging markets and part of what should be the fastest growing. And Alcatel's revenue was down 12 per cent year over year."
Overall, Chambers characterised it as a solid quarter, although the vendor's outlook for Q4 disappointed investors.