Telecommunications service providers cutting spending on IT infrastructure is a recurring phenomenon. When they pay billions and billions year after year to networking gear vendors such as Cisco even amid a tough business climate, it is only natural for them to think of innovative ways (software-based networking, Cloud, etc) to meet their technology requirements.
So it is up to hardware vendors to come up with a strategy to counter such headwinds rather than articulate it as an excuse for missing analyst estimates. Only visionary companies can rise to market challenges.
Cisco had consistently been known as one, but its strategies of late have been getting blunted quarter after quarter.
Negative Guidance: There is nonetheless one area where Cisco has not been disappointing market watchers. It is in the quarterly habit of negative guidance from CEO John Chambers. He reinforced that reputation when announcing the Q1 2015 results. By way of Q1 assessment and Q2 outlook, he pointed to capital budget cuts by service providers such as AT&T and weak sales in emerging markets as potential challenges.
The last few quarters, Cisco’s earnings had topped estimates but weak guidance had put pressure on the stock.
Details on the latest quarter can be checked out at http://www.cnbc.com/id/102179808
G Joslin Vethakumar