Cisco girds for Huawei's US entry

First, the positives: Overall product orders grew 13% from last year. Cisco Unified Computing System continues its torrid pace, realizing order growth of 116% and over 1,500 new clients. Cisco now has just less than 9,000 clients for the data center convergence platform.

The Nexus 2000

Switching gross margins improved sequentially -- the Nexus 2000, 3000, 4000 and 5000 increased by nearly five points and switching margins are now back to Q1 FY 2011 levels. You might recall that pressure on switching profit margins kicked off the restructuring that Cisco initiated before this year when it killed Flip, gutted its consumer business, eliminated over 12,000 jobs and refocused on its core businesses.

High-end routing revenue increased year-over-year, with 11% growth in orders and 4% in earnings. And Cisco saw an uptick in public sector afterwards several quarters of softness, with 10% order growth from last year. US public sector orders grew 5%.

The downswing although

On the downswing although, overall routing revenue declined 3%. Switching revenue was flat. And margins on the Nexus 7000 core data center switch are however not up to Cisco's liking though they grew 2% in Q1.

Access routing revenue was down 16%. Cisco CEO John Chambers says Cisco needs to pack more functionality into the ISR line in order to stimulate demand. Hard to gauge what more could be added when the ISR already includes VoIP (Voice over Internet Protocol), WAN optimization, video, collaboration, virtualized server and a bare metal application server.

Going to Q2, Europe and India may be soft markets given economic and governmental strife. However Cisco still guided to a revenue boost of 7% to 8% over last year. Analysts like Ittai Kidron of Oppenheimer & Co. reacted favorably to the quarter: