ENTERPRISE MARKET PULLS CISCO THROUGH Q4

Cisco Systems' fourth-quarter results provided a much needed boost to Wall Street last week, but they aren't reflective of the telecom industry and may actually represent major changes coming for the bellwether company.

Though revenues for the quarter were flat at $4.8 billion, they showed a year-over-year increase of 12%. However, it was enterprise sales — not revenue from service providers — that drove Cisco's results. That imbalance will eventually even out, according to Cisco Chairman and CEO John Chambers.

“Once [commercial and enterprise] capex is growing significantly, look out a couple quarters for service providers [to experience that growth],” Chambers said during Cisco's quarterly earnings call.

Indeed, despite the lackluster service provider returns, some in the industry are taking Cisco's enterprise results as a positive sign.

“Their results should help us all,” said Karl Toompuu, director of product line management for long-haul optical start-up Ceyba. “A big part of the downturn is perception and fear. The enterprise sales don't help the root cause, but they help once a ripple effect starts.”

Chambers views the slow return of the service provider segment as potential for future growth. “If it takes longer to turn around, I'd argue that it works to our long-term benefit because we'll be able to invest in a time when many of our peers won't be able to,” he said.

Cisco has $21.5 billion in cash and investments on hand in contrast to its biggest competitors, which gives the company the means to buy assets or develop internally.

While Cisco has traditionally relied on its enterprise revenue, the company has dabbled with varying success in the service provider market. Though its routers are deployed in virtually every carrier's network, it has yet to detail a mobile strategy and hasn't had much success cracking open the ILEC and PTT switch market. Chambers noted that the company is looking for strategic service provider wins, but those could be as much as three to five years out.

“Cisco is at a crucial turning point,” said Hilary Mine, executive vice president at Probe Research. “I question how committed Chambers is to service providers.”

At the same time, the company must be vigilant against smaller start-ups encroaching on its stronghold in the enterprise router market, Mine said.