RESEARCH TRIANGLE PARK – Cisco is facing increasing tough times in the Chinese technology market as the trade war worsens, and its CEO Chuck Robbins says the tech giant can’t even go after some business now.
“[W]e’re just being … we’re being uninvited to bid,” Robbins told Wall Street analysts in a conference call Wednesday evening. The tech giant is not “allowed to even participate anymore.”
In part he blamed the trade war for the impact on a tech firm that employs some 5,000 people at its large campus in RTP.
“[We] definitely saw significant impact on our business in China as it relates to what’s going over the trade war right now,” he said.
Even though Cisco reported a 4.5 percent increase in year-over-year revenue to $13.4 billion, beat revenue expectations by nearly $36 million, and topped earning expectations by a penny at 83 cents, its shares declined 7 percent in after-hours trading. But that is likely due more to finance guidance that includes expected turmoil in markets and business as the trade war with China, tariffs and other issues are increasing expectations of a possible economic downturn – thus perhaps less demand for Cisco gear and services.
The earnings news came as filings disclosed that Cisco laid off nearly 500 workers at its Silicon Valley operations, adding to a similar number of cuts last December.
The trade war certainly hurt Cisco in China the past quarter. The previous quarter he said Cisco was positioned to deal with China and tariff issues.
Although the share of business done by Cisco has declined over several years, a 25 percent drop in its usual 3 percent of revenue from that country was a point of concern to Robbins.
“Let me just give you a little bit of color … I mean tell the overall Chinese market as I said earlier is certainly not a major play for us, but it has just dropped precipitously in light of the trade discussions,” he said in the call.
“So, it has a short-term impact and if you were – where we are selling for years we’ve sold infrastructure to the large carriers in China, which has just — it’s been slowly declining and we saw it even decline more rapidly last quarter.
“And then, what we’ve seen is in the state-owned enterprises anymore, we’re just being we’re being uninvited to bid. We’re not being allowed to even participate anymore. So those are the enterprises that’s where the large impact was this past quarter, so it was just a much faster decline of what we candidly expected.”
Earlier, in talking China, Robbins used the word “dramatically” to describe what happened in China.
“I mean you’re right it’s down below 3 [ercepnt], it’s a small part of our business, but obviously when it falls very dramatically it can still have some impact because it is greater than zero,” Robbins said.
Not that he’s losing sleep over it.
“But, long-term it’s not a concern that I worry about much at this point,” Robbins said.
“And so, that’s really the extent of what we saw there. I mean the China reduction contributed to a point of the issue in all of enterprise for us. So, it was that significant and we definitely saw significant impact on our business in China as it relates to what’s going over the trade war right now.”