Feb 13, 2019
Cisco gives bullish revenue forecast
Bloomberg News
,Cisco Systems Inc. (CSCO.O) gave a strong forecast for the current quarter, signaling its confidence that corporations are continuing to spend on their computer networks.
Sales in the fiscal third quarter will increase 4 per cent to 6 per cent from the same period a year earlier, the San Jose, California-based company said Wednesday in a statement. That indicates revenue of as much as US$13.2 billion, compared with an analysts’ average estimate of US$12.83 billion.
Adjusted profit will be 76 cents to 78 cents a share in the period ending April, the company said. Analysts predicted 76 cents, according to estimates compiled by Bloomberg.
The upbeat report shows that new software and services, along with updated versions of Cisco’s existing hardware, are winning orders from companies wanting to retool their computer networks. Chief Executive Officer Chuck Robbins has returned the largest maker of networking gear to growth. The second quarter was the company’s fifth consecutive period of year-over-year expansion. Robbins is trying to wean Cisco off its dependence on combinations of high-priced hardware and software and make it more of a technology services company, trying to align his products more closely with customers’ changing networking demands.
Cisco shares rose about 3 per cent in extended trading following the earnings announcement. The stock, which gained 13 per cent last year while avoiding a broader sell-off in technology companies, earlier closed at US$47.50 in New York.
The company’s applications division posted a 24 per cent increase in revenue in the quarter, security jumped 18 per cent and the main hardware unit grew 6 per cent, the company said. By region, sales from Europe Middle East and Africa rose 8 per cent, Americas increased 7 per cent and Asia Pacific gained 5 per cent.
While it’s new businesses a growing more quickly, Cisco’s hardware unit still supplies 57 per cent of total revenue. Strong sales of the company’s Catalyst 9000 switches helped boost that business.
Cisco’s status as the biggest maker of gear used to connect computers makes its earnings a broad indicator of corporate spending plans. Unlike many other U.S. hardware makers, the company gets a tiny per centage of sales in China where it’s been largely locked out of the market. That means it may gain from the U.S. government’s actions to discourage purchases of equipment from one of its biggest rivals, Huawei Technologies Co. Cisco may be able to pick up orders where the Chinese company is being excluded on security concerns, some analysts have said.
In the fiscal second quarter, net income was US$2.8 billion, or 63 cents a share, compared with a loss a year earlier. Revenue rose 4.7 per cent to US$12.4 billion.
In the period ended Jan. 26, Cisco reported adjusted profit of 73 cents a share. That compares with the average analyst estimate of 72 cents.