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Cisco profit edges past estimates

By Reuters
US, 14 May 2015

Cisco Systems' quarterly profit edged past market estimates as demand for new switches, routers, wireless gear and servers made up for sluggish spending by telecom customers and weak sales in emerging markets.

The network equipment maker is transitioning toward high-end switches and routers, and investing in new products such as data analytics software and cloud-management tools.

Last month, market research firm Gartner forecast a decline in telecom services spending this year.

"In terms of the whole service provider carrier spending, we are not assuming that it's going to improve in the near future," CFO Kelly Kramer told Reuters.

In his last post-earnings conference call, outgoing chief executive John Chambers also dispelled rumours that Cisco had bid $9 billion for FireEye, sending the cyber security company's shares down 3.4% in extended trading.

Company veteran Chuck Robbins will take over as CEO when Chambers steps down in July after 20 years at the helm.

"I will be his wingman," Chambers said.

Several analysts have interpreted the transition as a signal of changing priorities at the company, which is struggling to boost its bottom line in the era of cloud computing.

Cisco said it expects an adjusted profit of 55-57 cents per share for the current quarter.

Analysts on average were expecting 56 cents per share, according to Thomson Reuters I/B/E/S.

The company also forecast revenue growth of 1% to 3%.

"We are modelling the volatility in emerging markets to continue for several more quarters," Chambers said.

Revenue from Russia fell 41% in the third quarter ended 25 April, the company said. Revenue from Brazil declined 10% and from China 20%.

Total revenue increased 5.1% to $12.14 billion, ahead of an expected $12.07 billion.

On an adjusted basis, the company earned 54 cents per share, a cent more than what analysts expected.

The results were a "solid execution in a tough environment" said analysts at Cantor Fitzgerald.

The company's net profit rose to $2.44 billion, or 47 cents per share, from $2.18 billion, or 42 cents per share, a year earlier.

Cisco shares were marginally down in after-market trading on Wednesday.

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