"Cisco Eases Decline in Network Equipment Sales as It Moves Beyond Pandemic Impact"

[Asia Economy Reporter Koo Eun-mo] The decline in network equipment sales at Cisco Systems, which had sharply dropped due to COVID-19, has significantly eased. Software service sales continue to rise, indicating a gradual recovery from the pandemic's impact.

According to Hana Financial Investment on the 20th, Cisco's revenue for the second quarter of fiscal year 2021 (January settlement) was $11.96 billion, down 0.4% compared to the same period last year, meeting market expectations. Adjusted earnings per share (EPS) increased by 2.6%, slightly surpassing expectations at $0.79.

The Infrastructure Platforms segment, which provides network equipment, recorded revenue of $6.4 billion, a 2% decrease year-over-year but slightly above the market estimate of $6.2 billion. Switching revenue remained at last year's level, but router sales to service providers continued to decline compared to the previous year. The Applications segment posted revenue of $1.35 billion, similar to the previous year and in line with market expectations. Among applications, the video conferencing service 'WebEx' recorded double-digit growth. The Security segment grew by 10% to $820 million, slightly below the market consensus of $830 million.

Product orders rebounded positively with a 1% increase after five consecutive quarters of year-over-year decline. Orders from the public sector, service providers (SP), and commercial segments rose by 10%, 5%, and 1%, respectively, but corporate investment continued to decline, resulting in a -9% drop in corporate customer orders. Cisco disclosed individual figures for cloud service provider orders for the first time. Orders from cloud service providers doubled year-over-year, increasing their share to 25% of the total SP business.

However, the guidance for the third quarter fell short of market expectations. Cisco projected third-quarter revenue growth of 3-5%, exceeding the consensus of 3%. Kim Jae-im, a researcher at Hana Financial Investment, stated, "Considering that the third quarter this year is one week longer than usual, Cisco's guidance slightly underperforms market expectations. While demand for network equipment is expected to rebound as the economy recovers, Cisco's guidance suggests that the rebound may be slower than anticipated and that uncertainties remain." He added, "It will be necessary to confirm the speed of Cisco's demand recovery through future performance."

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