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Newer companies drive Cisco’s earnings beat, shares rise

(Reuters) – Cisco Systems Inc reported better-than-expected quarterly profit on Wednesday, as it benefited from strength in the newer applications and security companies, while shaking off the impact of a U. S.-China trade war on the networking gear business.

FILE PHOTO: The logo of the AMERICAN networking giant Cisco Systems is seen at their headquarters in Issy-les-Moulineaux, near Paris, France, April 3, 2018. REUTERS/Philippe Wojazer/File Photo

Shares of the Dow component rose 4 percent in extended trading after the network-gear maker also forecast third-quarter profit above analysts’ estimates and boosted its share buyback program and quarterly dividend.

Analysts are concerned about the impact of the revolution on Cisco’s traditional business of selling switches and routers, as some of these are made in China. But these objections were brushed aside by the Chief Executive, Chuck Robbins who said that the demand is constant through the neighborhood.

“It is certainly one of the more complex macro geopolitical environments, that I think that we’ve seen in a while with the different moving parts,” Robbins said.

“But to be honest, from the first day of the quarter and on the last day of the quarter, we saw zero difference.”

Robbins, who took the helm in July 2015, the acquisitions of a central part of his efforts to add muscle to the hardware of the giant newer growth areas such as cloud, internet of things and cyber security.

Under Robbins, Cisco has turned to software and cyber security to make up for slowing demand for the routers and switches, as companies increasingly shift to cloud services offered by Amazon.com Inc, Microsoft Corp and Alphabet Inc instead of building their own networks.

“The strong growth in the area of security and software defined networking are an indication of the Cisco stay a leader in emerging technologies and change in more spending per customer, or the opening of new opportunities,” Morningstar analyst Mark Cash said.

The company said it expected third-quarter revenue growth of 4 percent to 6 percent, which equates to a range of between $12.96 billion and $13.21 billion. Analysts had expected $12.84 billion.

In the last quarter, the revenue of software companies increased from 24 percent to $1.47 billion.

Security business, which sells firewall protection and breach detection systems, is also placed at 18 per cent jump in sales to $658 million.

Sales in the infrastructure platform business, which includes the company’s traditional business of switches and routers, increased by 6 percent to $7.13 billion.

The total turnover rose by 4.7 percent to $12.45 billion in the second quarter, above analysts ‘ expectations of $12.41 billion.

On an adjusted basis, the company earned 73 cents per share, beating estimates of 72 cents per share.

Reporting by Arjuna Panchadar in Bengaluru; Editing by Anil D’silva

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