Cisco Gives Bullish Revenue Forecast

Cisco Gives Bullish Revenue Forecast
Cisco

Cisco gave a strong forecast for the current quarter, signaling confidence that corporations are continuing to spend on the company’s computer networks, according to Bloomberg.

Sales in the fiscal third quarter will increase 4 percent to 6 percent from the same period a year earlier, the company said in a statement. That indicates revenue of as much as $12.97 billion, compared with an analysts’ average estimate of $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.

In the fiscal second quarter, net income was $2.8 billion, or 63 cents a share, compared with a loss a year earlier. Revenue rose 4.7 percent to $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.

The company’s applications division posted a 24 percent increase in revenue in the quarter, security jumped 18 percent and the main hardware unit grew 6 percent, the company said. By region, sales from Europe Middle East and Africa rose 8 percent, Americas increased 7 percent and Asia Pacific gained 5 percent.

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. CEO 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.

Robbins said he was surprised that the worsening economic and geopolitical environment hasn’t had a negative impact. His customers’ continued appetite for Cisco’s products shows how important the latest network technology has become for companies trying to expand their businesses, he said.

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 percentage 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. Cisco may be able to pick up orders where the Chinese company is being excluded on security concerns, some analysts have said.