The world's largest telecom equipment provider, Cisco Systems (CSCO - Free Cisco Stock Report), reported in-line results for the fiscal second quarter (ended January 28, 2017). The top line came in at $11.6 billion, close to our $11.55 billion estimate. Earnings per share of $0.57 were a penny shy of our $0.58 call.

Product revenue declined 4%, year over year, while services were up 5%. The largest unit, Switching, experienced a 5% revenue decline, as demand from campus (enterprise) customers was weak. Encouragingly, revenue from the ACI data center switching portfolio grew 28%. This line competes with generic "white box" software defined network solutions from the likes of Facebook (FB) and VMware (VMW), which some investors believe will disrupt the space due to cost advantages. This trend has yet to materialize, but remains a long-term threat to Cisco, in our view.

The Routing unit continues to struggle, with revenue falling 10%. Meanwhile, Security was a bright spot, as the group's top line grew 14%, the fifth-consecutive quarter with a double-digit advance. Collaboration products also did well, as sales there rose 4%, thanks largely to Webex. The Data Center business saw revenue drop 4%, and Wireless grew 3%, owing to strength in the cloud-based Wi-Fi solution Meraki.

Notably, the company made progress shifting away from hardware toward software and services. Indeed, deferred revenue from the latter was up 51% during the quarter, and made up 31% of the total versus 28% a year ago.

Taking a look at customer groups, enterprises increased purchases by 1%, commercial entities bought 3% more, and the public sector spent 6% less than last year. Revenue from the all-important service provider group was only down 1%, as American companies offset general weakness throughout Europe.

Meanwhile, the board of directors approved a 12% increase in the dividend, and the yield now stands at a healthy 3.5%.

The company guided revenues to be down 2% to flat in the April quarter, in line with our call for a 1% decline. Too, earnings per share are expected to land between $0.57 and $0.59. Thus, we are leaving intact our $0.58 estimate.

While here was not much from the most recent quarterly release to get excited about, in our view, the stock traded modestly higher on the news. Although the shares are a decent choice form income-oriented investors, we see few growth catalysts in the near future.

About The Company:Cisco Systems Incorporated is a leading provider of Internet Protocol-based networking and other products for transporting data, voice, and video across geographically dispersed local-area networks, metropolitan-area networks, and wide-area networks. Devices are primarily integrated by Cisco IOS Software and include Routers, Switches, New Products, and Other. Provides services associated with these products.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.