Software Strategy Pays Off For Cisco -- WSJ
August 16 2018 - 3:02AM
Dow Jones News
By Jay Greene
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 16, 2018).
Cisco Systems Inc. on Wednesday reported its third-consecutive
quarter of revenue growth, evidence the networking-gear maker's
move to build up its software business is paying off.
Shares of Cisco jumped 6.3% in after-hours trading after
finishing the regular day at $43.86.
Cisco's streak -- the company generated $12.84 billion in total
revenue in its fiscal fourth quarter, up 6% from a year earlier --
comes after two years of declines during which it faced increasing
pressure from competitors while it relied heavily on slower-growth
hardware sales.
And the company expects the run to continue, providing guidance
that calls for revenue growth of between 5% and 7% in the current
quarter.
Cisco has seen its financial fortunes improve, as it focused on
software sales, particularly in the security arena. Revenue in its
security segment revenue jumped 12% to $627 million.
Net income surged 57% to $3.8 billion, or 81 cents a share.
Adjusted earnings came to 70 cents a share, beating analysts'
expectations by a penny, according to a survey by S&P Global
Market Intelligence. Analysts had expected revenue of $12.76
billion.
"I'm pragmatic enough to know that it's a combination of both"
the company's performance and the macroeconomic environment, Cisco
Chief Executive Chuck Robbins told analysts.
One area of concern for Mr. Robbins is the growing trade dispute
between the U.S. and China. Last month, the White House said it was
considering expanding the trade fight with China by assessing
tariffs on $200 billion in Chinese goods, in addition to duties
levied and proposed on $50 billion of Chinese imports earlier this
summer.
The proposed tariffs target, among other items, switches and
routers -- some of which Cisco makes in China and imports to the
U.S.
"We're in deep discussions in Washington with the administration
on trying to get to a favorable outcome," Mr. Robbins told
analysts. He didn't detail the potential impact the proposed
tariffs might have on the company's results.
In Cisco's largest segment, infrastructure platforms, revenue
grew 7% to $7.44 billion, while revenue in its applications
business climbed 10% to $1.34 billion.
Cisco said it returned $7.5 billion to shareholders in its
fiscal fourth quarter. Its total cash is at $46.5 billion, 34%
lower than it was a year ago. The increasing shareholder returns
come after Cisco repatriated $67 billion of its foreign cash
holdings earlier this year, the result of the new U.S. tax law. Six
months ago, the company said it would spend about $44 billion on
share buybacks and dividends over two years.
"I don't think anyone believes we need the level of cash we have
now," Mr. Robbins said in an interview.
Write to Jay Greene at Jay.Greene@wsj.com
(END) Dow Jones Newswires
August 16, 2018 02:47 ET (06:47 GMT)
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