By Don Clark and Anna Prior
Cisco Systems Inc. showed signs that a sharp business slump is
easing, though the big network-equipment provider posted further
declines in quarterly revenue and profit.
The company reported results Wednesday for its third fiscal
quarter that were better than it had projected, and said revenue in
the current period would be better than recent seasonal patterns.
Cisco's shares jumped about 7% in after-hours trading.
"I am pleased with the progress to return to growth," said John
Chambers, Cisco's chief executive, during a conference call with
analysts.
Cisco, known for routing and switching systems that funnel data
among servers systems and to the Internet, is often among the first
big technology vendors to experience changes in demand among
corporate buyers. The company signaled last year that it expected
business to slow and trimmed some 4,000 jobs, or 5% of its
workforce.
Cisco has experienced particularly tough sledding in China,
Brazil, Mexico, India and Russia. Sales of its best-known server
and switching products also have declined.
Some of those trends continued in the third quarter, with orders
from those emerging markets off 13%. Routing revenue declined
10%.
Revenue from switching systems, Cisco's single largest business,
declined 6% in the third period. But Mr. Chambers said orders are
pouring in for its new Nexus 9000 router line, with customers
growing to 175 companies from 20 and a pipeline of orders for
nearly 1,000 more customers.
He cautioned, however, that it will be "several more quarters"
before the company sees overall growth in its switching
business.
Cisco's business was strongest in the Americas, where it posted
revenue growth of about 10%, with orders in the U.S. up 7%.
Overall, Cisco posted a 12% decline in third-quarter net income
and a 5.5% drop in revenue. Mr. Chambers said he expects the
company's revenue to decline 1% to 3% in the current period from
the same quarter a year ago. That would represent growth of 4% to
6% from the third period, compared with recent average sequential
growth of about 3.2%.
"Cisco delivered pretty decent numbers, considering continued
weakness in emerging markets and its core business," said Bill
Kreher, an analyst at Edward Jones.
Besides Cisco's existing businesses, the company is among the
heaviest backers of a trend called the Internet of Things that
promises to connect all kinds of everyday objects and drive demand
for a variety of additional hardware. The company also recently
announced plans to enter the market for online computing services,
pledging to spend $1 billion over the next two years to enter that
market.
For the quarter ended April 26, Cisco said its net income came
to $2.18 billion, or 42 cents a share, down from $2.48 billion, or
46 cents a share, a year earlier. Revenue fell to $11.55 billion
from $12.22 billion. In February, the company had projected revenue
would decline 6% to 8%.
Write to Don Clark at don.clark@wsj.com and Anna Prior at
anna.prior@wsj.com
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