By Don Clark And Nathan Becker
Cisco Systems Inc.'s recent growth pace eased a bit in the
latest quarter, but the network-equipment giant and its new chief
executive said the company's recent rebound remains on track.
The Silicon Valley company Wednesday said net income rose 3.2%
in the fourth fiscal period ended in July, while revenue grew
3.9%
The company also forecast revenue growth for the first quarter
of 2% to 4%, as well as adjusted earnings per share of 55 cents to
57 cents. Analysts polled by Thomson Reuters expect 3% growth and
56 cents of earnings.
Chief executive Chuck Robbins, overseeing the company's earnings
announcement for the first time after succeeding longtime CEO John
Chambers, characterized the results as strong, noting that he was
"particularly pleased with the strong growth of deferred revenue,
which shows we are very effectively driving our business to a more
predictable software-based business model."
Cisco in May had reported a 12% increase in third-quarter profit
on a 5% increase in revenue.
The company, based in San Jose, Calif., is the biggest maker of
hardware that connects computers to each other and to the Internet.
The company, which often experiences boom and bust cycles ahead of
other technology vendors, has long been considered a bellwether for
corporate demand.
Until recently, Cisco was grappling with sales declines in its
two biggest hardware businesses, switching and routing systems. But
new product lines have spurred a rebound in sales in those
categories. Cisco said Wednesday that switching revenue grew 2% in
the fourth period, while router sales grew 3%.
China has been another problem. Cisco faces tough competition
there from local suppliers that include Huawei Technologies Co.
Cisco and other technology suppliers have also been hurt by
suspicions about their links to U.S. intelligence agencies.
Mr. Robbins has moved to dispense with nonperforming businesses
to concentrate on what is likely to show profitable growth. Cisco,
for example, last month said it would sell its TV set-top box unit
to Technicolor SA for $600 million, a key part of $6.9 billion
acquisition a decade earlier.
The decision to divest that business reflects Cisco's struggles
in video equipment sold to cable operators, where revenues have
been falling lately. Cisco intends to stop selling equipment used
in homes but keep equipment used in corporate offices.
The company said Wednesday that fourth-quarter revenue in its
service provider video declined 7%, compared with a 5% decline in
the third period.
In all, Cisco on Wednesday reported profit in the fourth quarter
ended July 25 of $2.32 billion, or 45 cents a share, compared with
profit the prior year of $2.25 billion, or 43 cents a share.
Revenue rose to $12.84 billion from $12.36 billion.
Cisco said per-share earnings were 59 cents on adjusted basis
that excludes stock-based compensation and other items, up from 55
cents in the year earlier period. On that basis, analysts had
polled by Thomson Reuters had expected earnings of 56 cents a share
on revenue of $12.65 billion.
Write to Don Clark at don.clark@wsj.com and Nathan Becker at
nathan.becker@wsj.com
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