Network giant Cisco Systems Inc. expects slight revenue growth in the next quarter, which would be its first breakthrough since November 2019, but some of its major equipment businesses are still suffering from the pandemic.
On Tuesday, Cisco CSCO,
reported slightly better-than-expected tax profits in the second quarter, seeing “gradual improvement” in the growth of orders in its commercial, public sector and service provider businesses, which account for nearly three-quarters of its product orders. But he also said that corporate business remained weak, due to long sales cycles and pauses in corporate spending during the pandemic.
Among the areas most affected by the pandemic, total product revenue was $ 8.6 billion, down 1%, and network infrastructure platforms fell 3%.
The company’s WebEx videoconferencing business again showed double-digit revenue growth, as companies continue to use it for group videoconferences while employees work from home.
While remote work is a boon for Cisco videoconferencing software, it is causing delays in some network update projects on corporate campuses. Cisco CEO Chuck Robbins said employees who eventually return to the office will help with infrastructure sales, such as its switching and routing products and its software-based network service, called CAT 9000.
“I really believe it will be a hybrid, where people will work from home and everyone will kind of get here, where they will work from home three days a week and work from the office two days a week and vice versa,” said Robbins. “The question is what accommodation this leads to customers, based on employees’ concerns about space issues, concerns about future pandemics or other concerns. This is what we do not yet know. “
He added that some customers are now also starting to upgrade to the next generation of WiFi, called WiFi 6.
The future of a hybrid workplace is also fueling demand for WiFi 6, said Robbins. Many employees will still hold videoconferences at meetings that take place at the office, placing even more demands on corporate networks.
Cisco said it expects revenue in the third fiscal quarter to grow 3.5% to 5.5% year on year. The company’s guidance includes the fact that the third quarter will have an extra week, noted Cisco’s new chief financial officer, Scott Herren, who took over from Kelly Kramer.
Investors were clearly hoping for more from Cisco as they reduced their shares as the call progressed, with their shares falling nearly 5% in after-hours trading. It appears that major expansions or network upgrades are likely to continue to occur slowly, as needed, while most of corporate America is still working from home.