Cisco Shows Signs of Pressure
November 16 2016 - 4:00PM
Dow Jones News
Cisco Systems Inc. showed more signs of pressure on its flagship
networking hardware in the latest quarter, despite growth in
smaller businesses it entered more recently.
The big Silicon Valley company said first-quarter net income
fell 4.4%, largely due to restructuring charges, while revenue
declined 2.6%. Cisco projected that revenue would decline again in
the current period.
Shares of the company fell 4.3% after hours.
Cisco's charges stem largely from a plan announced in August to
shed 5,500 employees—7% of its workforce—in the latest of a series
of responses to market shifts that include customers opting for
software and services over hardware. The company said its headcount
fell by 1,326 during the quarter to a total of 72,385.
Chuck Robbins, Cisco's chief executive, characterized its
results as good "despite a challenging global business environment"
and said the company "performed well in our priority areas."
The challenges facing Cisco include a growing preference among
some web companies and network operators to avoid big-name hardware
vendors. Some are choosing to run networking software on
inexpensive commodity-style switching systems from vendors such as
Taiwan's Quanta Computer Inc. Other customers are turning to
external cloud services rather than buying and managing their own
computers and networking devices.
Cisco said on Wednesday that revenue in switching hardware, its
largest business, declined 7%. Routing revenue rose 6%.
Mr. Robbins, who just completed his first year as chief
executive, has tried to shift Cisco's focus toward faster-growing
businesses built on software and services. Cisco said revenue from
its security business rose 11%. Revenue from its collaboration
segment, however, fell 3%.
In all, Cisco reported net income for the quarter ended Oct. 29
of $2.32 billion, or 46 cents a share, compared with profit in the
year-earlier period of $2.43 billion, or 48 cents. Revenue declined
to $12.35 billion from $12.68 billion.
Excluding restructuring charges and other one-time items, Cisco
put adjusted earnings per share at 61 cents. Analysts polled by
FactSet had projected earnings on that basis of 59 cents.
For the current period, Cisco projected adjusted profit of 55
cents to 57 cents a share and said revenue would fall 2% to 4%.
Analysts on that basis had projected earnings per share of 59 cents
on revenue of $12.155 billion.
Write to Don Clark at don.clark@wsj.com
(END) Dow Jones Newswires
November 16, 2016 16:45 ET (21:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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