May 16, 2013 – Cisco Systems, the biggest maker of networking equipment, reported fiscal third-quarter profit that topped estimates as corporate customers increased spending to meet surging demand for data delivery via the Web.
Profit excluding some items was 51 cents a share, while revenue rose 5.4 percent to $12.22 billion, the San Jose, California-based company said in a statement. Analysts on average had projected profit of 49 cents and sales of $12.17 billion, according to data compiled by Bloomberg.
Cisco is benefiting as companies step up investments in data-traffic networks to accommodate users who are increasingly relying on smartphones and tablets to watch video and surf the Web. Price cuts are also bolstering sales of traditional switches and routers, while technologies added in recent acquisitions are helping Cisco expand in servers and wireless networking, said Jason Ader, an analyst at William Blair & Co.
“They’re focused on where they can really make a dent in their growth,” said Ader, who has the equivalent of a buy rating on the shares. “Overall, they’ve gotten more aggressive and more engaged.”
Cassandra Mooshian, analyst at tech market research group TBR, said that Cisco’s successful internal BYOD efforts have enabled the vendor to not only retain talent, but also opens options to sell its own solutions and programs to other enterprises dealing with a wave of mobile adoption and demand.
“Cisco will utilize best practices that it has acquired over the past four years through developing and running a BYOD program to go to market with its own BYOD solutions and present a strong case around the benefits of BYOD for organizations,” Mooshian wrote. “We believe there will be many BYOD cross- and up-selling opportunities for Cisco Services as clients increasingly embrace mobility.”
For the fourth quarter, which ends in July, Cisco forecast profit excluding some items of 50 cents to 52 cents a share, compared with an average analyst estimate of 51 cents. Sales will rise 4 percent to 7 percent from a year earlier, Cisco said, indicating a range of $12.16 billion to $12.51 billion. Analysts on average predicted $12.47 billion. Orders from U.S. corporations helped buoy sales, while demand was weak in southern Europe and China, Chief Executive Officer John Chambers said on a conference call. Business elsewhere in Europe is starting to “bottom out,” and China should remain sluggish for several more quarters, Chambers said.
Third-quarter product orders from the Americas grew 7 percent from a year earlier, while orders in Asia grew 1 percent. Orders from Europe, the Middle East and Africa were little changed.
Chambers has stepped up acquisitions to bolster the company’s core business of routers and switches for large companies and telecommunications carriers.
Last month, Cisco agreed to buy U.K. networking company Ubiquisys for about $310 million, gaining technology that helps wireless carriers provide better service to smartphone and tablet users. The transaction followed purchases in recent months of Intucell Ltd. for $475 million and Meraki Inc. for $1.2 billion.
In March of last year, Cisco agreed to buy NDS Group Ltd. for about $5 billion to tap demand for technologies that deliver and protect pay-TV content. Cisco is also shedding units. In January, the company said that it sold its Linksys home-router unit for an undisclosed price, which followed earlier moves to exit consumer businesses such as the Flip video-camera unit.
Chambers has also cut jobs, shut businesses and reduced prices to fend off competition from Hewlett-Packard and Juniper Networks. Cuts announced in March brought the total number of positions Chambers has eliminated in the past two years to more than 8,300 as the company has shuttered units and expanded in corporate software and technology services.
(Justin Kern of Information-Management.com contributed reporting to this story.)
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