Cisco Earnings Preview: 5 Key Areas Partners Need To Watch

The 5 Things To Watch For

The networking giant will report its third fiscal quarter numbers Wednesday, with Wall Street is expecting revenues to hit $11.9 billion, at 58 cents per share for the quarter.

Cisco has been on an acquisition tear this month, revealing its plan to acquire artificial intelligence specialist MindMeld for $125 million, as well as software-defined WAN vendor Viptela for $610 million. The San Jose, Calif.-based networking leader's bread-and-butter business of switching and routers has been declining over recent quarters, while security has flourished.

Click through to read about the five key areas channel partners need to watch for on Wednesday that could foreshadow the company's direction.

Switching And Routing

For the company's second quarter, Cisco switching revenue fell 5 percent to $3.3 billion year over year, while its routing business dropped 10 percent to $1.8 billion. Cisco's networking business accounted for roughly 60 percent of its $37.25 billion in product revenues for fiscal year 2016.

Meanwhile, Cisco's share of the switching market slipped from 60.7 percent in 2015 to 57 percent in 2016, according to data from research firm IDC. With networking rivals Juniper Networks and Arista Networks taking a more open networking approach by disaggregating hardware from software, it will be interesting to see if Cisco's switching and routing sales continue to decline.

Project Lindt

The networking industry was abuzz when reports came out in March that Cisco was developing a standalone networking OS, Lindt, that would allow customers to run its most sophisticated networking features on older and lower-cost Cisco routers and switches. Many partners believe Cisco was taking a step in the direction of becoming a more open networking company by creating a common software for its hardware.

However, in an interview with CRN regarding Lindt, Cisco channel chief Wendy Bahr said, "Our strategy is the tight integration of world-class software with world-class hardware, providing the best value for our customers and the best monetization opportunity for our partners."

With CEO Chuck Robbins running the earnings call, partners should listen for any information about Lindt and the impact it would have on the channel.

Service Provider

Another area of concern is Cisco's service provider (SP) business, which accounts for roughly 25 percent of sales. The business has been consistently declining over the last three quarters. For its fourth fiscal quarter of 2016, Cisco's SP revenues dropped 5 percent year over year, followed by a 12-percent decline in its 2017 first fiscal quarter, then a 1-percent dip in its most recent quarter.

As carriers look to cut costs by implementing new technology such as software-defined WAN and virtual routers, Cisco needs to find a way to turn this business around.


Cisco has been doubling down and betting big on security over the past few years, which has been paying off. During the company's 2017 second quarter, Cisco's security business grew 14 percent year over year to $528 million. It was the vendor's fifth consecutive quarter of double-digit growth in security.

Partners say Cisco's holistic view around tying security and networking together is fueling sales "beyond hypergrowth." It would be huge for Cisco, which touts itself as the global leader in cybersecurity, to post double-digit growth in security for the sixth consecutive quarter.

M&A In 2017

With plans to close its acquisitions of SD-WAN specialist Viptela and AI provider MindMeld later this year, it would be interesting to hear anything about Cisco's M&A strategy for the rest of this year. The networking giant spent billions acquiring 11 companies in 2015, followed by another seven vendors last year. So far, Cisco has acquired only three companies is year, including its $3.7 billion purchase of AppDynamics.

Partners will also be keen to listen for information around future integration plans and possible timeframes for the MindMeld and Viptela technologies into the Cisco portfolio.