Cisco bounces back from restructure with positive Q3

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Cisco bounces back from restructure with positive Q3

Cisco's third fiscal quarter results beat analyst expectations, confirming the networking titan has bounced back following a year-long restructuring process.

But Cisco's stock plunged after hours following disappointing guidance for Q4 and Cisco CEO John Chambers’s comments about customer spending trends, which tend to spook analysts who see Cisco as an IT industry bellwether.

Cisco views a "cautious, wait-and-see environment," Chambers said on Cisco's third-quarter earnings conference call.

For its fiscal Q3, Cisco reported sales of $US11.59 billion ($A11.49bn) , up 6.6 percent from $US10.9 billion a year earlier and ahead of a Wall Street analyst projected consensus of $US11.57 billion. It reported $US2.2 billion in Q3 profit, up 19.8 percent over $US1.8 billion in the year-ago quarter. Cisco exited the quarter with $US48.4 billion in cash and investments, ahead of $US46.7 billion in its second quarter.

In Q4, Cisco expects revenue up between 2 and 5 percent, forecasting revenue of $US11.42 billion to $US11.8 billion. That was short, however, of the 7 percent -- an implied $US11.99 billion -- analysts had projected.

Chambers reiterated Cisco is seeing a cautious environment with smaller deal sizes and lengthier sales cycles. He also voiced disappointment in Cisco's collaboration segment -- a key area of focus for Cisco -- which was flat, although Cisco attributed a slowdown in telepresence sales partially to spending challenges in the public sector.

Cisco geography revenue and segment earnings

Cisco saw revenue increases in all of its geographies: 24 percent in Asia-Pacific and Japan, 5 percent in EMEA, and 3 percent in the Americas. Product orders were up 5 percent in Americas and 7 percent in Asia-Pacific and Japan, though flat in EMEA.

Overall product revenue, according to Cisco, was up 5 percent year-over-year, with Cisco's core networking businesses, including switching and routing, up by single digits. Cisco services revenue was up 13 percent year-over-year.

By segment, switching was up 5 percent, flat in next-generation network routing and collaboration, up 12 percent in service provider video, up 20 percent in wireless, up 9 percent in security, and, crucial for Cisco maintaining its strength with the Unified Computing System (UCS) platform, up 67 percent in data center.

Customer segment orders were up or slightly down by single digits: public sector up 3 percent, commercial (SMB and midmarket) up 8 percent, service provider up 5 percent and enterprise down 1 percent.

Cisco also added headcount: 65,223, up from 63,970 in the second quarter. Chambers also made a brief note of Cisco's stepped-up pace of acquisitions, including its $US5 billion pickup of UK-based NDS, a move Chambers said will help Cisco better offer next-generation video experiences at a faster speed.

This article originally appeared at

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