Chuck Robbins, CEO of Cisco Technologies Inc., spoke during a panel session at the World Economic Forum (WEF) in Davos, Switzerland, on Tuesday, January 17, 2017. It is attended by world leaders, influential executives, bankers, and policymakers. the 47th annual meeting of the World Economic Forum in Davos from 17 to 20 January.
Jason Alden | Bloomberg | Getty Images
Cisco shares fell 5% in extended operations on Tuesday after the company posted second-quarter tax gains that showed lasting struggles in its most prominent product segment. However, the company’s quarterly results and guidance exceeded analysts ’estimates.
Here’s how the company did it:
- Earnings: 79 cents per share, adjusted, compared to 76 cents per share, as analysts expected, according to Refinitiv.
- Income: $ 11.96 million, up from $ 11.92 million, as analysts expected, according to Refinitiv.
Overall, Cisco’s revenue fell slightly on an annualized basis during the quarter, which ended Jan. 23, according to a statement. Revenue declined for the fifth consecutive quarter. The weaker economy has reduced the company’s growth prospects, as well as some customer decisions to leverage cloud services to keep employees working efficiently while staying away during the coronavirus pandemic.
In the company’s leading product segment, Infrastructure Platforms, which includes sales of data center network switches and routers, Cisco generated revenue of $ 6.333 billion, 3% less than the year and higher than the consensus of $ 6.23 million among analysts surveyed by FactSet.
“The business market remains smooth, driven by some extended sales cycles and a continued pause in spending among some pandemic-induced customers,” Cisco CEO Chuck Robbins told analysts in a conference call. Although switching revenue was flat, router and server revenue was down.
The Applications unit, including Webex’s video calling products, generated revenue of $ 1.35 billion, year-over-year and just below FactSet’s consensus estimate of $ 1.408 billion. Webex now has 600 million “quarterly average” users, Robbins said.
Robbins noted the momentum among web-scale customers operating large-scale data centers. He said about a quarter of Cisco’s service provider’s revenue came from web-scale customers during the quarter.
During the quarter, Cisco raised its bid to buy network hardware company Acacia Communications to $ 4.5 billion, from $ 2.6 billion. The company also announced that it planned to acquire cloud communications software maker IMImobile for $ 730 million and introduced third-party tool integrations for Webex.
As for the guidelines, Cisco said it expects from 80 cents to 82 cents adjusted earnings per share in 3.5% to 5% revenue growth in the third fiscal quarter. Analysts surveyed by Refinitiv had expected 81 cents of adjusted earnings per share and $ 12.35 million in revenue, which would mean 3% growth. The quarter includes an extra week.
Cisco has concerns about its supply chain, which reflects broader concerns about chip shortages, said Scott Herren, the company’s chief financial officer.
“We are in touch with all of our key suppliers on this front,” Herren said. “We’re taking some advantage of the volume of purchases we have, expanding this supply chain further outwards, all with the aim of making sure we can protect customers’ shipments. So there’s a bit of wind in against in these lines only the current supply chain “.
Excluding the movement outside of business hours, Cisco shares have risen about 9% since the beginning of the year, while the S&P 500 index has risen 4%.
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