Revenue and earnings per share were under industry analyst consensus estimates of $0.41 per share.
Cisco cited pre-tax charges of $237 million related to the workforce reduction plan announced in August 2013, and a pre-tax charge of $257 million related to compensation expense in connection with Cisco’s acquisition of the remaining interest in Insieme Networks.
Cisco also warned that revenue would decline 8-10% this quarter (Q2) due to lower demand in certain countries, such as China, due to fallout from the NSA scandal. Service Provider orders also fell 13%. The order backlog is significantly weaker than expected.
“While our revenue growth was below our expectation, our financials are strong, our strategy is strong and our innovation engine is executing extremely well. We remain confident in our long-term goal to be the #1 IT company in the world and help our customers solve their biggest business problems,” stated John Chambers, Cisco’s CEO.
Some notes from the quarterly conference call.
- The three areas of weakness are emerging markets, the Service Provider segment, and major switching/router product transitions.
- The switching business is stable and performing well. Data center products are hot.
- Wireless is performing well and the transition to 802.11ac is in its early stages. Meraki is performing well.
- NGN routing revenue is down. The first shipments of the new NCS platform occurred in the quarter. The new architecture of the NCS leads to a longer evaluation and sales cycle.
- The set-top box business declined 20% YoY. Cisco said it is committed to the segment, evolving its product line to the cloud, and walking away from deals that don’t make sense.
- Sales in China continue to decline due to “political dynamics”. Chambers attributed this to suspicion caused by fallout from the NSA scandal.
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