NEW YORK (TheStreet) –– Cisco (CSCO) continues to see ups and downs depending on the region, leading to an uneven recovery for the world's largest networking equipment manufacturer, particularly as net neutrality becomes a bigger debate in the U.S.
"We do think it's a very unusual dynamic right now in the service providers," said Cisco President Rob Lloyd in an interview with TheStreet. "There are many large U.S. service providers stating that their particular capex will be down in 2015. Our readout in the guidance in the second quarter is that it will be a factor and if you add to that net neutrality, that's another factor that comes to bear.
"We have some big customers and even at our scale and size, we can't insulate ourselves entirely from a customer that may be changing their spending pattern. But to offset that, we might have some customers that are increasing their spending pattern building out LTE network on mobile, cable networking access, cloud services and are partnering with Cisco to do so. It's a unique position in the U.S. in the service provider space right now."
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For its fiscal second quarter, Cisco expects to earn between 50 and 52 cents a share, with revenue expected to grow between 4% and 7%. Analysts surveyed expect the San Jose-based Cisco to earn 53 cents, with revenue growing 8.3% year over year.
Despite the potential weakness seen in the second quarter and potentially all of 2015, Cisco was able to deliver fiscal first-quarter results that topped expectations, as a favorable product mix helped gross margins, Lloyd said.
Shares of Cisco dipped in early Thursday trading, falling 0.84% to $24.90.
Cisco earned 54 cents on an adjusted basis on $12.25 billion in revenue, compared to the 53 cents and $12.16 billion estimated from a Thomson Reuters survey. "We had some favorable high margin product mix that shipped in the quarter," Lloyd said. "We continue to work on improving our cost structure through value engineering which are manufacturing projects to continue to improve the cost."
The company generated $2.5 billion in cash flow from operations in the first quarter, down from $2.6 billion in the fiscal fourth quarter, but up from $2.6 billion in the fiscal first quarter of 2014. Cisco ended the quarter with approximately $52.1 billion in cash and cash equivalents, the same as it ended fiscal 2014 with.
In addition to reporting first-quarter results, Cisco noted CFO Frank Calderoni would be stepping down, effective Jan. 1, 2015. Taking his place will be Kelly A. Kramer, who is currently senior vice president, Business Technology and Operations Finance of Cisco.
Despite concerns about net neutrality and the company's business abroad (Cisco's sales in China were down 33%), analysts were largely optimistic that the company was beginning to see signs of a turnaround. Here's what a few of them had to say: