Cisco profit edges past estimates despite weak telecom spending

Reuters News
Posted: May 13, 2015 4:13 PM

By Anya George Tharakan and Arathy S Nair

(Reuters) - Cisco Systems Inc's <CSCO.O> quarterly profit edged past market estimates as demand for new switches, routers, wireless gear and servers made up for sluggish spending by telecom customers and weak sales in emerging markets.

The network equipment maker is making a transition toward high-end switches and routers and investing in new products such as data analytics software and cloud-management tools.

Last month, market research firm Gartner <IT.N> forecast a decline in telecom services spending this year. (

"In terms of the whole service provider carrier spending, we are not assuming that it's going to improve in the near future," Chief Financial Officer Kelly Kramer told Reuters.

In his last post-earnings conference call, outgoing Chief Executive John Chambers also dispelled rumors that Cisco had bid $9 billion for FireEye Inc <FEYE.O>, sending the cybersecurity company's shares down 3.4 percent in extended trading.

Company veteran Chuck Robbins will take over as CEO when Chambers steps down in July after 20 years at the helm.

"I will be his wingman," Chambers said.

Several analysts have interpreted the transition as a signal of changing priorities of the company, which is struggling to boost bottom line in the era of cloud computing.

Cisco said it expects an adjusted profit of 55-57 cents per share for the current quarter.

Analysts on average were expecting 56 cents per share, according to Thomson Reuters I/B/E/S.

The company also forecast revenue growth of 1-3 percent.

"We are modeling the volatility in emerging markets to continue for several more quarters," Chambers said.

Revenue from Russia fell 41 percent in the in the third quarter ended April 25, the company said. Revenue from Brazil declined 10 percent and from China 20 percent.

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Total revenue increased 5.1 percent to $12.14 billion, ahead of an expected $12.07 billion.

On an adjusted basis, the company earned 54 cents per share, a cent more than what analysts expected.

The results were a "solid execution in a tough environment" said analysts at Cantor Fitzgerald.

The company's net profit rose to $2.44 billion, or 47 cents per share, from $2.18 billion, or 42 cents per share, a year earlier.

Cisco shares were marginally down in after-market trading on Wednesday.

(Reporting By Arathy S Nair and Anya George Tharakan in Bengaluru; Editing by Joyjeet Das and Diane Craft)