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Cisco beats analysts' expectations

by on15 November 2018

Software moves are paying off

Cisco beat analysts’ estimates for quarterly revenue and profit thanks to demand for its routers and switches as well as growth in newer areas of focus such as software.

Cisco tried moves into software and cybersecurity to cushion the impact from slowing demand for its routers and switches from companies increasingly shifting to cloud services.

Revenue in its application software businesses rose 18 per cent to $1.42 billion, beating analysts’ average estimate of $1.37 billion.

Sales in its security business, which offers firewall protection and breach detection systems, rose 11 percent to $651 million.

Deals such as the $2.35 billion purchase of cybersecurity provider Duo Security in August have played an important part in driving growth in Cisco’s newer business.

Acquisitions provided an 80-basis-point boost to the company’s first-quarter results compared with a year ago, Chief Financial Officer Kelly Kramer said on a post-earnings call with analysts.

Revenue in its infrastructure platform unit, which houses the switches and routers business, rose about eight percent to $7.64 billion, topping expectation of $7.39 billion.

Subscriptions, which provide a more steady revenue flow, accounted for 57 percent of total software revenue in the first quarter, the company said. The preceding quarter’s share was 56 percent.

Cisco Chief Executive Charles Robbins said in an interview that the company was impacted by the Trump administration’s 10 percent tariffs on imports from China in the first quarter.

“We implemented some price increases, as we said we would, and frankly, we didn’t see any difference in the momentum before we did that and the momentum we saw after that in the quarter”, Robbins told CNBC. “We would prefer that the tariffs don’t get increased to 25 percent in January.”

The company said it expects second-quarter revenue growth of between 5 per cent and 7 per cent from a year earlier. This implies a range of between $12.48 billion and $12.72 billion, while analysts forecast $12.53 billion.

Total revenue rose 7.7 per cent to $13.07 billion, topping the estimate of $12.87 billion.

Last modified on 15 November 2018
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