Why Did Cisco’s Routing Revenues Fall in Fiscal 3Q16?
What Drove Cisco’s Revenues in Fiscal 3Q16?
Revenues fell 5% YoY
Cisco’s (CSCO) routing business saw revenues fall 5% YoY (year-over-year) in fiscal 3Q16. Revenues in this segment fell from $2 billion in fiscal 3Q15 to $1.9 billion in fiscal 3Q16. This 5% decline was driven by the weakness in “high end” routing products. Cisco has stated that it’s seeing continued strength with its web scale customers where its core development continued. Sales to the top ten web scale customers rose 31% YoY.
A router is connected to a minimum of two networks. It basically decides which way to send each information packet based on the networks it is connected to. A router is located at a gateway and is generally part of a network switch. An edge router interfaces with an asynchronous transfer mode (or ATM) network. A next generation network (or NGN) is a packet-based network and provides telecommunication services.
Major players in the router segment
Cisco Systems and Juniper Networks continues to dominate the Core Router segment. The companies had a combined market share of over 80%. The scenario changed with the re-entry of Alcatel-Lucent (ALU) in this segment.
Alcatel-Lucent’s market share in edge routing in Europe (EFA) grew to 24%. The company edged out Juniper Networks (JNPR) to become the number two vendor in this segment in 2010, despite entering the market in 2003. Alcatel-Lucent can use this platform as leverage to increase its market share in the Core Router segment as well. Alcatel-Lucent was acquired by Europe’s (EFA) (FEP) Nokia (NOK) in 2015.
According to Cisco, mobile data traffic in the Middle East and Africa (or MEA) is projected to grow at a CAGR (compounded annual growth rate) of 72% by 2019. Mobile and data traffic in Central and Eastern Europe are expected to grow at a CAGR of 71%, whereas Asia-Pacific’s could grow at a CAGR of 58% by 2019. Mobile data traffic in Latin America, North America, and Western Europe is expected to grow at a CAGR of 59%, 47%, and 48%, respectively.
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