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How Did Cisco Perform in Fiscal 1Q17?

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Part 5
How Did Cisco Perform in Fiscal 1Q17? PART 5 OF 9

Why Did Cisco’s 1Q17 Revenues Fall in the Switching Business?

Revenues fell 7% YoY

US (SPY) based Cisco’s (CSCO) Switching business saw revenues fall 7% YoY (year-over-year) in fiscal 1Q17. Revenues in this segment fell from $4 billion in fiscal 1Q16 to $3.7 billion in fiscal 1Q17. According to Cisco, this 7% fall was driven by “weakness in campus partially offset by continued strong momentum in ACI, which was up 33%.” Campus business accounts for over 65% of Cisco’s Switching revenue.

Switches contain ports to connect different network segments. Switches are similar to hubs (a networking device that connects multiple devices to the network using cables) but offer better performance. Switching is a networking technology used in campuses, branch offices, and data centers. Switches are used within buildings in local-area networks (or LANs) and across great distances in wide-area networks (or WANs).

Why Did Cisco’s 1Q17 Revenues Fall in the Switching Business?

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Cisco has a market share of 56.8% in the Ethernet Switching business

According to IDC, Cisco Systems’ (CSCO) revenues fell 2.6% YoY (year-over-year) in the Ethernet switching space in calendar 2Q16. Its market share fell to 56.8% that quarter as compared to 59.0% in 1Q16 and 60.0% in 2Q15. Other major players in this market include Hewlett Packard Enterprise (HPE), Juniper Networks (JNPR), and China’s (FXI) Huawei. The worldwide Ethernet switching market grew 3% YoY to ~$6.0 billion at the end of 2Q16. Brocade (BRCD) is another small player in the switching space.

HPE’s Ethernet switching revenues fell 34.8% YoY in 2Q16. The company has a market share of 6.0% as compared to 9.2% in 4Q15 and 9.7% in 1Q16. Huawei’s revenues rose 44.0% YoY in 2Q16, whereas Juniper Networks’ revenues fell 4.3% YoY in the switching business.

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