CSCO Cisco Systems Inc

By Don Clark 

Cisco Systems Inc. posted a 31% jump in quarterly net profit on Wednesday, but showed signs that weakening economic conditions have taken a toll on the businesses that the networking equipment giant serves.

The San Jose, Calif.-based company, whose results are closely watched as an indicator of corporate technology demand, also boosted its quarterly dividend and stock-buyback plan, and projected stronger revenue for the current quarter than some analysts had expected.

Its shares, off 17% since the beginning of 2016, rose 7% in after-hours trading following the news.

Cisco's numbers for the period ended in January showed both positive and negative signs, which the company attributed partly to steady buying by telecom services and caution among other corporate customers.

For example, the company said revenue grew 5% in a routing equipment segment that had been shrinking lately, a category of hardware largely purchased by communications carriers. Video equipment purchased by carriers rose 37%. Security and collaboration products also grew.

But sales of switching gear--Cisco's largest single business--declined 4%, reversing a recent pattern. Revenue for Cisco's data center group, led by sales of server systems, declined 3% after growing 24% in the period ending in October.

Chuck Robbins, Cisco's chief executive, said the company began hearing signs of caution among some corporate customers in January, toward the end of the quarter. In response to developments such as declining stock prices, he said, companies began holding up orders on nonessential purchases such as some types of the switching systems used on corporate campuses.

"They were trying to adjust to what was going on," Mr. Robbins said. "They just paused a bit."

On the other hand, Cisco seems to have gotten past a long-term slide in its business in China. The company had been hurt there both by suspicion that non-Chinese hardware could be used by spies as well as the emergence of credible alternative products from local suppliers such as Huawei Technologies Co. In November, Cisco had reported a 40% jump in its orders in China. The company said orders rose another 64% in the period ended in January, led by demand for video equipment.

Cisco has faced an industrywide shift of some networking functions to software from the hardware that has been its specialty. Mr. Robbins and predecessor John Chambers, who gave up the CEO job last summer, have responded by trying to build new software and services that can generate recurring revenues.

To underscore Cisco's belief that it can weather the current turbulence, the company on Wednesday raised its quarterly dividend by 24% and increased its stock-buyback plan by $15 billion.

"I feel very confident," Mr. Robbins said.

In all, Cisco reported that net profit for the period ended Jan. 23 rose to $3.15 billion, or 62 cents a share, up from $2.4 billion, or 46 cents a share. On an adjusted basis that includes items such as stock-based compensation and tax-related gains, the company's per-share earnings rose to 57 cents from 53 cents a year ago.

Total revenue slipped slightly to $11.93 billion from $11.94 billion a year ago. Excluding a video business that Cisco divested in November, the company's revenue rose 2% to $11.8 billion.

Analysts surveyed by Thomson Reuters were expecting adjusted earnings of 54 cents a share on revenue of $11.75 billion.

For its fiscal third quarter, Cisco projected per-share adjusted earnings per share of between 54 cents and 56 cents, along with revenue growth of between 1% and 4%. Analysts, on average, were expecting earnings on a similar basis of 55 cents a share and revenue to slide 1%, according to Thomson Reuters.

Write to Don Clark at don.clark@wsj.com

(END) Dow Jones Newswires

February 10, 2016 19:32 ET (00:32 GMT)

Cisco Systems (NASDAQ:CSCO)
Historical Stock Chart
From Mar 2024 to Apr 2024

Cisco Systems (NASDAQ:CSCO)
Historical Stock Chart
From Apr 2023 to Apr 2024