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Cisco posts disappointing Q2 profits and revenue alongside $100m investment in IoE

Cisco expects revenue to drop by between six and eight per cent in the current quarter in a results call for Q2 that lays out plans for heavy investment in the emerging Internet of Everything [IoE] sector.

Related: CES 2014: Cisco predicts an automated, connected future

The decline, which comes as a result of diminishing demand for hardware on a worldwide basis, is in line with forecasts on Wall Street and was delivered at the same time as it reported a decrease of eight per cent in net income to $1.4 billion [£840 million] and a dip of eight per cent in revenue to $11.2 billion [£6.73 billion].

“We delivered the results we expected this quarter. I'm pleased with the progress we've made managing through the technology transitions of cloud, mobile, security and video. Our financials are strong and our strategy is solid. The major market transitions are networking centric and as the Internet of Everything becomes more important to business, cities and countries, Cisco is uniquely positioned to help our customers solve their biggest business problems,” stated CEO John Chambers.

Its investment in the IoE sector comes in the form of a $100 million [£60 million] fund that is designed to back early stage companies in the sector and is being done to capitalise on an IoE sector that has the potential to generate $4.6 trillion [£2.7 trillion] for public sector organisations over the next 10 years.

Cisco is another that has blamed a worldwide boycott on US equipment after revelations of National Security Agency [NSA] spying, which has impacted its ability to do business in various markets, primarily China and others in the Far East.

This has added to the global slowdown in hardware sales that has seen its orders in Brazil, India, China, Russia and Mexico decrease 10 per cent compared to the previous quarter when orders were down 20 per cent.

"If you look at hardware spending across the board, it's being negatively impacted not just by the negative spending environment, but by the movement to the cloud," FBN Securities analyst Shebly Seyrafi told Reuters. "Hardware's glory days are behind us, now it's matter of what can we do" to drive growth.

On the international agenda it will invest some $1.35 billion [£810 million] on expansion in Mexico as well as increasing the manufacture and production of advanced enterprise Wi-Fi access points in Brazil.

Related: Cisco axing 4,000 more jobs as international sales plummet

Cisco’s increased investment in the IoE sector comes after Chambers told CES 2014 that the firm is moving in that direction and enthusiastic about a world in which everything is IP-enabled, automated and connected.