Cisco Evades Trade Fallout As Revenue and Profit Rise -- WSJ

Date : 02/14/2019 @ 8:02AM
Source : Dow Jones News
Stock : Cisco Systems, Inc. (MM) (CSCO)
Quote : 53.31  -0.2 (-0.37%) @ 8:30PM

Cisco Evades Trade Fallout As Revenue and Profit Rise -- WSJ

Cisco Systems, Inc. (MM) (NASDAQ:CSCO)
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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 (February 14, 2019).

Cisco Systems Inc. dodged significant fallout from the trade fight between the U.S. and China, posting strong growth in sales of its networking gear even as it raised prices to deal with the spat.

Shares rose 3.7% in after-hours trading Wednesday after Cisco delivered quarterly results and guidance that topped Wall Street forecasts, and said it would return more cash to shareholders.

The Trump administration's 10% tariffs on Chinese-produced goods went into effect in late September. They hit a collection of switches and routers, some of which Cisco makes in China and imports to the U.S. Cisco had raised prices on some products in response. Analysts had been looking for evidence of an impact on Cisco, but none materialized, Chief Executive Chuck Robbins said in an interview. "We have navigated them incredibly well, and I think the results would tell you that they didn't have much of an impact," Mr. Robbins said.

The White House has threatened to boost tariffs further on March 1 to 25% if the two countries don't resolve their differences.

Mr. Robbins believes the U.S. and China are making progress, and that the deadline could be pushed out if they are close to an agreement. "I remain optimistic, probably more optimistic today than I was 30 days ago, " he said.

Cisco reported a fiscal second-quarter profit of $2.82 billion. It had an $8.78 billion loss a year earlier, when it took an $11.1 billion charge related to the new U.S. tax law.

On an adjusted basis, profit came to 73 cents. Revenue rose 4.7% to $12.45 billion. Revenue from Cisco's core business selling switches, routers and other networking equipment to companies rose 6% to $7.13 billion.

Analysts had expected adjusted profit of 72 cents a share and $12.41 billion in revenue, according to Refinitiv.

Mr. Robbins said the company's strategy of diversifying beyond hardware is working. Sales from Cisco's security business -- a fast-growing but small piece of the company -- rose 18% to $658 million. Its applications business, which includes videoconferencing and other products, grew 24% to $1.47 billion.

One area where Cisco hasn't seen a boost is from the U.S. campaign against its largest global competitor, Huawei Technologies Co. The U.S. has pressured Western governments not to use Huawei technology over fears its products can be used by China for spying -- allegations the company has denied. Despite the U.S. pressure, Cisco hasn't seen any material benefit to its business, Mr. Robbins said.

For the current quarter, Cisco said it expects per-share profit of 76 cents to 78 cents a share, in line with Wall Street's forecast of 77 cents. It expects revenue to grow 4% to 6%; the low end of the range tops analysts' forecasts of 3% growth to $12.84 billion.

Cisco is raising its quarterly dividend by 2 cents to 35 cents a share. It is also adding $15 billion to its share-repurchase program, bringing the total available to $24 billion.

--Maria Armental contributed to this article

Write to Jay Greene at Jay.Greene@wsj.com

 

(END) Dow Jones Newswires

February 14, 2019 02:47 ET (07:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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