Cisco Posts Strong Quarterly Results on Robust Switching Sales

Network equipment maker Cisco Systems Inc reported stronger-than-expected quarterly revenue and profit as demand for switching equipment and routers helped to make up for weak spending by the company's traditional telecom customers.

Cisco, whose shares were up 5.6 percent in extended trading on Wednesday, has been trying to make a transition toward a new cycle of high-end switches and routers.

The switching business, which makes products that handle traffic at large Internet data centers, brought in about 39 percent of Cisco's total hardware revenue in 2014, while the router business accounted for about 21.2 percent.

"They are seeing very robust switching sales," Needham & Co analyst Alex Henderson told Reuters, adding that this was good news for others in the sector such as Infoblox Inc, Gigamon Inc and F5 Networks Inc.

Revenue from Cisco's hardware business rose 7.8 percent to $9.08 billion (roughly Rs. 56,708 crores) in the company's second quarter ended January 24.

Revenue from services, which includes the company's software and cloud offerings, rose 4.6 percent to $2.86 billion (roughly Rs. 17,861 crores).

Subscriptions generate more predictable recurring revenue than hardware sales. The services business is also less likely to suffer from sudden shifts in demand.

"They may have the worst in the rear view right now," said Wedbush Securities analyst Scott Thompson.

The quarter showed the best balance of growth across all of the company's geographies, products and segments, Chief Executive John Chambers said in a statement.

Cisco, which raised its quarterly dividend by 2 cents to 21 cents, said its net profit rose to $2.4 billion (roughly Rs. 14,988 crores), or 46 cents per share, in the quarter from $1.43 billion (roughly Rs. 8,930 crores), or 27 cents per share, a year earlier.

Total revenue rose 7 percent to $11.94 billion (roughly Rs. 74,569 crores).

On an adjusted basis, the company earned 53 cents per share.

Analysts on average had expected earnings of 51 cents per share on revenue of $11.8 billion (roughly Rs. 73,695 crores).

Cisco forecast an adjusted profit of 51-53 cents per share for the current quarter, in line with analysts' estimates.

The company also forecast revenue growth of 3-5 percent.

Cisco's shares closed at $26.93 on the Nasdaq.

© Thomson Reuters 2015