Cisco's 3Q Outlook Falls Short of Wall Street Targets
August 12 2020 - 4:53PM
Dow Jones News
By Maria Armental
Network-equipment giant Cisco Systems Inc. reported a 9% sales
decline in the most recent quarter, marking the first annual sales
decline in three years as the pandemic-driven economic shock takes
a toll on its core business of switches and routers.
This quarter, the San Jose, Calif.-based company expects to make
41 cents to 47 cents a share, or 69 cents to 71 cents a share as
adjusted, with revenue declining 9% to 11%.
Analysts surveyed by FactSet expected an adjusted profit of 75
cents a share with revenue falling about 7% to $12.23 billion.
Cisco, considered a proxy for corporate high-tech hardware
demand, has extended free offers and trials for its
videoconferencing-service Webex and security offerings as companies
moved to remote work during the pandemic. The offerings, company
officials said, could deliver a revenue boost in future
quarters.
More than half of its revenue now comes from software and
services, Chief Executive Chuck Robbins said in a statement.
"As we focus on the future, we are rebalancing our R&D
investments to focus on new areas so we can continue to offer
customers the best, most relevant technology in simpler, more
easily consumable ways," he said.
This month, it bought ThousandEyes Inc. to boost its network
performance and monitoring across enterprise and into the
cloud.
"If the pandemic response around the world has taught us
anything, it's the timeliness of bringing ThousandEyes and Cisco
technology together and providing it in the simplest possible way
to our users right now," Todd Nightingale, senior vice president
and general manager of Cisco's enterprise networking and cloud
business, said in a conference call in May to discuss the
acquisition.
Cisco didn't address its proposed acquisition of Acacia
Communications Inc. in the earnings release. The deal, which was
expected to close by the fourth quarter, awaited regulatory
approval in China.
Revenue from Acacia will be included in Cisco's infrastructure
platforms product category.
In the most recent quarter, ended July 25, revenue from that
business, which includes routers and switches, fell 16%, while
revenue from the applications business, which includes
videoconferencing, fell 9%.
The one bright spot again was the small but fast-growing
security segment, which posted a 10% revenue increase to $814
million.
Overall, revenue fell 9% to $12.15 billion.
Meanwhile, fourth-quarter profit rose 19% to $2.64 billion, or
62 cents a share. On an adjusted basis, profit fell to 80 cents a
share from 83 cents a year earlier.
Cisco had projected 57 cents to 62 cents a share in profit, or
72 cents to 74 cents a share as adjusted, with revenue declining
8.5% to 11.5%. Analysts expected 65 cents a share, or 74 cents as
adjusted, on $12.09 billion in revenue.
It ended the year at a profit of $11.21 billion on $49.30
billion in revenue, compared with a profit of $11.62 billion and
$51.90 billion in revenue a year earlier.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
August 12, 2020 16:38 ET (20:38 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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