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#Cisco Systems’ (CSCO) July quarter earnings report and order data already provided evidence that weak telecom capital spending was becoming a real problem for the company. The networking giant’s latest numbers show that the problem has intensified, just as it has for many peers. Together with a slowdown in Cisco’s very profitable enterprise switching business and pockets of weakness elsewhere, that’s going to make for a bumpy ride in the near-term. Even if there’s some encouraging progress with growth initiatives and a chance for major offshore cash tax relief. Cisco reported fiscal first quarter revenue of $12.35 billion (up 1% annually) and adjusted EPS of $0.61 (up 3%), topping consensus analyst estimates of $12.33 billion and $0.59. But it also guided for fiscal Q2 revenue growth (excluding year-ago sales for Cisco’s divested set-top unit) of -2% to -4% and adjusted EPS of $0.55 to $0.57, below consensus estimates for 1.9% total revenue growth and EPS of $0.59. Shares fell 4.3% in after-hours trading. They went into earnings just $0.38 below a 52-week high of $32.95, and up 16% on the year. Weak demand from carriers was the main culprit for the guidance: Cisco’s service provider product orders fell 12% annually in fiscal Q1, a notably steeper decline than Q4’s 5%. That resulted in total product orders dropping 2% (compares with 1% growth in Q4), in spite of a 5% increase in enterprise orders and a 1% increase in commercial (SMB) orders. Public sector orders were flat. On the earnings call, CEO Chuck Robbins said his company saw certain carriers “just fundamentally freeze capex.” He blamed several factors, including forex swings, industry consolidation, regulatory/political uncertainty and a focus on spending in areas (such as mobile radio networks) where Cisco doesn’t have much exposure. This comes after weak results and/or guidance were provided in October by telecom equipment giants Nokia (NOK) and Ericsson (ERIC) –the latter is a major Cisco partner–as well as optical networking hardware firm Infinera (INFN) . On Tuesday, Nokia guided at its annual Capital Markets Day for its core Networks division’s revenue to fall in 2017 “in line with its primary addressable market,” and for the entire company’s free cash flow to be just slightly positive next year. Though all of the aforementioned capex issues cited by Robbins may well be real, the fact so many of the world’s biggest carriers are see minimal, if not declining, revenue growth is hard to overlook when weighing the numbers posted by telecom equipment suppliers. Nor can it be overlooked that the one big source of service provider capex growth in recent years–cloud giants such as Google, Amazon and Facebook–often prefer to use “white-box” switches built by Asian contract manufacturers. Some are also avid customers of Arista Networks’ (ANET) switches. On the call, Robbins said Cisco’s sales to its top 10 cloud accounts were roughly flat in Q4, with some “incredibly strong” performances offset by spending pauses elsewhere. Meanwhile, Cisco’s switching revenue, which skews toward enterprises and makes up about 40% of product sales, fell 7%, to $3.7 billion. The company blamed weak demand for the “campus” switches used to handle office network traffic, which in turn was blamed on macro issues. But analysts also raised questions about data center switching sales, for which adoption of public cloud infrastructures is a headwind. Cisco asserted a product transition away from “legacy” hardware has weighed, and noted sales of its next-generation ACI switching hardware and software rose 33%. Routing revenue managed to grow 6% with the help of large deals. But with a majority of routing sales coming from carriers, Cisco suggested growth is likely to weaken. Elsewhere, wireless revenue (Wi-Fi dominated) fell 2%, collaboration revenue fell 3% and the data center reporting segment, which covers Cisco’s UCS servers, saw revenue drop 3%. It’s worth noting HP Enterprise (HPE) , which is a big Cisco rival in campus switching and Wi-Fi, saw its networking revenue grow 12% in the July quarter, with its Aruba Networks Wi-Fi unit posting 20% growth.

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