Cisco Profit Rises, but Outlook Disappoints
November 12 2015 - 5:20PM
Dow Jones News
Cisco Systems Inc. reported stronger-than-expected sales and
profit in its latest quarter, but the Silicon Valley giant's
guidance disappointed Wall Street.
The networking equipment maker said profit rose 33% in its
fiscal first quarter while revenue rose 3.6%. Cisco's adjusted
profit topped its own expectations and Wall Street's.
But shares fell 2% after hours as the company forecast a weaker
current quarter than analysts expected. It projected revenue
growth, of flat to up 2%, below estimates of 5% growth, with
adjusted earnings of 53 cents to 55 cents a share, below forecasts
of 56 cents.
"Our guidance reflects lower-than-expected order growth in [the
first quarter], driven largely by the uncertainty of the macro
environment and currency impacts," said Chief Executive Chuck
Robbins, in prepared remarks.
Cisco, whose hardware helps connect computers to each other and
the Internet, frequently experiences shifts in business conditions
ahead of some of its peers. Its revenue started growing in the
first fiscal quarter of last year after several lackluster
quarters.
Mr. Robbins assumed his position in July from John Chambers, who
led the company for 20 years and remains chairman. The new CEO has
pushed some changes in tactics, including discontinuing some
businesses and expressing a preference for strategic alliances with
large companies rather than risky acquisitions.
One example came Monday, when Cisco announced a far-reaching
deal with Ericsson AB. The pact is designed to combine Cisco's
strength in Internet technology with the Swedish company's
expertise in equipment used by wireless operators. The companies
agreed to collaborate in areas that include making existing
products work better together, while Ericsson will resell Cisco
gear.
In the short-term, Wall Street still closely scrutinize Cisco's
momentum in its two biggest businesses—switching and routing—which
rebounded in recent quarters after new models hit the market. The
company said Thursday that switching revenue grew 5% in the period,
while router sales declined 8%; those businesses, respectively,
grew 2% and 3% in the quarter ended in July.
Cisco is experiencing faster growth in newer kinds of products,
including conferencing hardware and software. That collaboration
business—Cisco's third-largest—saw revenue grow 17% in the first
quarter.
Revenue from the company's data center business, which includes
sales of server systems, jumped 24%.
In all, Cisco reported net income for the period ended Oct. 24
of $2.43 billion, or 48 per share, compared with profit in the
year-earlier period of $1.83 billion, or 35 cents a share. Revenue
rose to $12.68 billion from $12.25 billion.
On an adjusted basis that excludes share-based compensation and
other items, Cisco put net income at 59 cents. Analysts on that
basis had expected earnings of 56 cents a share on revenue of
$12.65 billion, according to Thomson Reuters.
Write to Don Clark at don.clark@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 12, 2015 17:05 ET (22:05 GMT)
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