"5G with WebScale, Wi-Fi 6, and Security" Cisco Accelerates Momentum

[Asia Economy Reporter Eunmo Koo] The US IT company Cisco Systems reported quarterly earnings that exceeded market expectations. The momentum for 5G revenue generation is emerging, with webscale, Wi-Fi 6, and security all coming together.

Cisco's revenue for the second quarter of fiscal year 2021 (November 2020 to January 2021) was $11.96 billion, a 0.4% decrease compared to the same period last year, and its Non-GAAP earnings per share (EPS) was $0.79. By business segment, while IT spending by enterprises has not fully recovered, the infrastructure division performed better than expected, but the applications and security divisions underperformed expectations.

Infrastructure division revenue was $6.39 billion, down 3% year-over-year but exceeding market expectations. The infrastructure platform saw weak sales of traditional switches due to the impact of COVID-19, but data centers and Wi-Fi 6 showed strong performance. The server market contracted due to supply shortages, which also reduced the related router market.

This quarter, Cisco paid $1.5 billion in dividends and repurchased $800 million worth of shares. So far in fiscal year 2021, total shareholder returns have reached $4.6 billion, accounting for 69% of total free cash flow (FCF). The quarterly dividend was raised by 3% year-over-year to $0.37 per share.

The acquisition of Acacia Communications, which nearly fell through due to opposition from Chinese authorities, is expected to be completed next quarter after an upward revision of the purchase price. Sujin Kim, a researcher at Mirae Asset Daewoo, noted in a report on the 14th, “Cisco is also feeling the semiconductor supply shortage issue recently emerging in the IT industry. In response, Cisco is focusing on cost reduction through a mix with software and securing as much volume as possible to maintain expected costs. However, the semiconductor shortage could affect the speed of IT infrastructure deployment in the future.”

Attention should be paid to the recovery of telecommunications companies by customer. The telecommunications customer segment (Service Provider), which had recorded nine consecutive quarters of negative growth due to delayed 5G investments, has returned to positive growth. Hyperscale products, which account for 25% of sales, led growth with triple-digit growth rates, and cable products, accounting for 15%, also showed strong performance. Additionally, thanks to Wi-Fi 6, a next-generation promising industry, Wi-Fi sales grew 20% year-over-year.

On the other hand, the existing telecommunications business, which accounts for 60% of sales, was sluggish as it is in the process of building 5G. However, researcher Kim pointed out that Cisco announced it has started building backhaul connecting backbone networks and base stations. He explained, “Currently, we are in the very early stages of orchestrating packet cores to backhaul for 5G solution deployment with 35 telecommunications customers worldwide. We expect that momentum has finally arrived in the 5G-related industry along with hyperscale.”

This content was produced with the assistance of AI translation services.