Menu
Cisco's software transition still a work in progress

Cisco's software transition still a work in progress

Cisco Systems reported third-quarter profit and revenue that topped analysts' estimates

Cisco chief, Chuck Robbins

Cisco chief, Chuck Robbins

Network gear maker Cisco Systems reported third-quarter profit and revenue that topped analysts' estimates on Wednesday, but shares fell four per cent after dour current-quarter forecasts indicated that the transition to a software-focused business remained a work in progress.

Cisco's stock has climbed 18 per cent and is the second biggest gainer among Dow components this year as investors bet on the company's turnaround under CEO Chuck Robbins.

Since taking the helm in July 2015, Robbins has steered the hardware giant away from its traditional business of supplying switches and routers and into newer growth areas such as cloud, Internet of things and cyber security.

Revenue in the company's closely watched security business, which offers firewall protection and breach detection systems, rose 11 per cent to US$583 million in the third quarter.

That missed estimate of US$584 million from six analysts polled by Thomson Reuters I/B/E/S. The division's revenue, however, topped estimates of US$573.6 million, according to data analytics firm FactSet.

Cisco's revenue from its services business also missed estimates.

Revenue from the business, which provides technical and internet network support, rose three per cent to US$3.16 billion but fell short of estimate of US$3.24 billion, according to Thomson Reuters I/B/E/S.

"Like other old smoke stack tech companies – MSFT, INTC, ORCL - this has been a somewhat of a slow process," said Dan Morgan, portfolio manager at Synovus Trust Company, who owns 362,980 shares of Cisco.

Robbins in a post-earnings call with Reuters said he was confident about the transition.

"The business model transition that we have been giving metrics on since I became the CEO continue to move in the right direction" he said.

Cisco forecast fourth-quarter profit of 68 cents to 70 cents per share, while analysts were expecting 69 cents, according to Thomson Reuters I/B/E/S.

The company expects revenue growth of four per cent to six per cent from a year earlier, which implies a range of between US$12.62 billion and US$12.86 billion. Analysts were expecting revenue of US$12.73 billion.

"(Cisco) needs to continue to aggressively pursue acquisition while also showing that it is utilizing acquired technologies to advance its own portfolio and support growth," said CFRA Research analyst Keith Snyder.

Net income rose to US$2.69 billion, or 56 cents per share, in the third quarter ended April 28, from US$2.52 billion, or 50 cents per share, a year earlier.

On an adjusted basis, the company earned 66 cents per share.

Total revenue rose 4.4 per cent to US$12.46 billion.

Analysts on average had expected a profit of 65 cents per share and revenue of US$12.43 billion.

(Reporting by Laharee Chatterjee in Bengaluru; Additional reporting by Vibhuti Sharma; Editing by Sriraj Kalluvila)

 


Follow Us

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags Networkingciscosoftware

Featured

Slideshows

EDGE 2018: Kiwis kick back with Super Rugby before NZ session

EDGE 2018: Kiwis kick back with Super Rugby before NZ session

New Zealanders kick-started EDGE 2018 with a bout of Super Rugby before a dedicated New Zealand session, in front of more than 50 partners, vendors and distributors on Hamilton Island.​

EDGE 2018: Kiwis kick back with Super Rugby before NZ session
EDGE 2018: Kiwis assess key customer priorities through NZ research

EDGE 2018: Kiwis assess key customer priorities through NZ research

EDGE 2018 kicked off with a dedicated New Zealand track, highlighting the key customer priorities across the local market, in association with Dell EMC. Delivered through EDGE Research - leveraging Kiwi data through Tech Research Asia - more than 50 partners, vendors and distributors combined during an interactive session to assess the changing spending patterns of the end-user and the subsequent impact to the channel.

EDGE 2018: Kiwis assess key customer priorities through NZ research
Show Comments