Cisco Posts Higher Profit, Says Tariffs Had Little Impact -- WSJ
May 16 2019 - 03:02AM
Dow Jones News
By Maria Armental
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 16, 2019).
Cisco Systems Inc.'s results for the most recent quarter beat
Wall Street targets, and the networking giant said it sees little
effect from higher tariffs in a U.S.-China trade clash.
Cisco, considered a proxy for high-tech hardware demand, is
being closely watched for how it has navigated the escalating trade
dispute between the two countries.
Chief Executive Chuck Robbins said the company has largely
offset financial damage from tariffs by raising prices and moving
contract manufacturing away from China.
Cisco outsources all of its manufacturing, and while it still
has some in China, it has reduced its exposure by working with its
suppliers, Chief Financial Officer Kelly Kramer said Wednesday in a
conference call with analysts.
Mr. Robbins said fourth-quarter guidance accounts for the higher
tariffs that went into effect last week.
"We see very minimal impact at this point," Mr. Robbins said.
"All that we needed to do is now behind us."
The U.S. increased tariffs on $200 billion of Chinese goods to
25% last week, and China plans to increase levies on $60 billion in
U.S. imports starting on June 1.
Cisco said its profit in the quarter ended April 27 rose 13% to
$3.04 billion, or 69 cents a share. On an adjusted basis, profit
rose to 78 cents a share from 66 cents a share a year earlier.
The company, based in San Jose, Calif., has been shifting its
business to make more money from software and subscriptions, which
provide a more predictable revenue stream. It reported that revenue
rose 4% in the third quarter to $12.96 billion.
Cisco had projected an adjusted profit of 76 cents to 78 cents a
share with revenue increasing 4% to 6% from a year earlier, while
analysts surveyed by FactSet expected an adjusted profit of 77
cents a share on $12.89 billion in revenue.
Gross profit margin improved to 63.1% from 62.3% a year
earlier.
At Cisco's core business selling switches, routers and other
networking equipment to businesses, revenue rose 5% to $7.55
billion, ahead of analysts' projected $7.46 billion.
Revenue in its security segment, a fast-growing but small piece
of the company, increased a better-than-expected 21% to $707
million. Meanwhile, revenue for the applications business, which
includes videoconferencing and other products, rose 9% to $1.43
billion, compared with analysts' projected $1.5 billion.
This quarter, Cisco projects adjusted profit of 80 cents to 82
cents a share with revenue increasing 4.5% to 6.5%. That compares
with analysts' projected 81 cents a share and revenue rising about
3.5% to $13.29 billion.
Shares, which have been trading at 2000 levels, rose 2.7% to
$53.85 in after-hours trading. In 2000, during the dot-com boom,
Cisco was briefly the world's most valuable company, with a market
capitalization of more than $500 billion. It is valued at about
$231 billion, based on Wednesday's $52.44 closing price.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
May 16, 2019 02:47 ET (06:47 GMT)
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