Cisco's second quarter financial performance was blighted by a fall in core product revenues, leading to lower quarter-on-quarter profit and revenues, as the company sought to ride out what its chief executive termed a "market transition".
Cisco's financial performance shows the compnay is riding out what chief executive John Chambers calls a "market transition". Photo credit: Sarah Tew/CNET News
On Wednesday, the San Jose, California-based IT infrastructure company reported profits of $1.5bn (£940m), down from $1.9bn in the previous quarter. Revenue was $10.4bn, down from $10.75bn in the previous quarter.
Gross margins decreased to 62.4 percent from 64.3 percent in the previous quarter.
"As a company, we are going through a period of transition as we move aggressively in the market with our architectural strategy," Cisco chief executive John Chambers said in a statement. "We have managed these market transitions many times, positioning Cisco and our customers for success."
On a conference call with analysts, Chambers said that revenues from switches — the company's second largest segment — had declined seven percent in the second quarter, year-on-year, to $1.151bn.
Chambers said that a problem for Cisco was the relative efficiency of its latest products, leading to lower overall margins. "The 7000 [switch] might have the functionality to a salesperson of two 6000 Catalysts, and so they have to sell almost two times to three times the volume of the 7000 to have the same revenue scenarios," he said.
The largest segment — 'new products', which includes datacentre, collaboration, security, wireless and telepresence products — grew 15 percent year-on-year, with revenues of $3.202bn.
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