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Cisco's service provider unit will have to wait for 5G boost

(Image credit: Future)

Concerns about the short-term prospects of Cisco’s service provider business and fears of an ongoing trade dispute between the US and China have led to the company posting a lower than expected forecast – concerning investors.

The company reported fourth quarter revenues of $13.4 billion, an increase of 6 per cent, and annual income of $51.7 billion – a rise of seven per cent.

Hardware, which has long been Cisco’s bread and butter, was up six per cent to $7.8 billion for the quarter, while software rose 11 per cent to $1.49 billion  and security increased 14 per cent to $714 million.

Cisco service provider

"Our Q4 results marked a strong end to a great year.  We are executing well in a dynamic environment, delivering tremendous innovation across our portfolio and extending our market leadership," said Cisco CEO Chuck Robbins.

"We are committed to providing our customers ongoing value through differentiated solutions, and we are well positioned to take advantage of the long-term growth opportunities ahead."

These figures are some of the strongest that Cisco has posted in recent years, but a predicted growth rate of 0 – 2 per cent for the next quarter has resulted in a drop in the firm’s share price.

Robbins said declining income from service providers contributed to the weak forecast. Having already expanded beyond networking into software and cloud services, Cisco has made a major play for the telecoms market with a 5G portfolio comprising services, infrastructure and automation.

Service provider income may not recover until mobile operators begin to make major investments in their core infrastructure to support enterprise applications that require high reliability and ultra-low latency.

The initial focus is on coverage, which means investments have been on radio access equipment (RAN) – markets sewn up by the triumvirate of Ericsson, Huawei and Nokia.

The majority of Cisco’s revenues come from the Americas and Europe, with just a fraction coming from China. However amid ongoing tensions, Chinese operators are now not entertaining bids for business. Revenues from Asia as a whole were down by 5 per cent.