Cisco's profit and sales beat Wall St forecasts

The company reports a 12% increase in net profit, to $2.4 billion

Cisco Systems delivered gains in quarterly profit and sales on Wednesday that slightly surpassed Wall Street's expectations.

The steady performance in its fiscal third quarter showed that Cisco, the giant maker of computer networking equipment, continues to do well in adapting to new technologies and holding off rivals.

The company reported a 12 per cent increase in net profit, to $2.4 billion. Its operating earnings of 54 cents a share were just above analysts' consensus estimate of 53 cents a share, as compiled by Thomson Reuters.

Revenue rose 5 per cent, to $12.1 billion, essentially in line with the average analyst forecast of $12.07 billion.

John T Chambers, Cisco's chief executive, said the solid performance was evidence the company was "pulling away from our competition."

The essence of Cisco's strategy, Chambers said in a conference call, was to steadily make the transition from "selling boxes" to selling efficient "outcomes" for customers with internet technology.

Parts of the business were weak: Sales to telecommunications and cable companies were off by 7 per cent and sales in emerging markets slipped, particularly in Russia and China.

Chambers said the business in China could be "turned around, assuming our governments get along."

Still, the weaknesses were more than offset by strength across the breadth of the business. Cisco said it expected revenue growth to ease in the current quarter to 1 to 3 per cent.

Cisco shares were down slightly in after-hours trading. Over the last year, Cisco shares have climbed 28 per cent.

Chambers, who is 65, announced last week that he would soon be stepping down as chief executive, a post he has held since 1995. He will be succeeded by Charles H Robbins, 49, the senior vice president for worldwide field operations. Robbins will take over on July 26, and Chambers will stay on as executive chairman.

Analysts expect no major shifts in strategy under Robbins, but probably a tilt in emphasis toward improving Cisco's operational efficiency and less on building up the corporation's formidable sales engine, a hallmark of Chambers's tenure.

Over the years, Cisco rivals have surfaced from Silicon Valley to China. But Cisco has managed to stay on top.

"Its scale and breadth are extremely hard to replicate," said Amitabh Passi, an analyst at UBS.

That heft amounts to what Pierre Ferragu, an analyst for the research firm Sanford C Bernstein, called "a powerful platform advantage" in a report last week.

To compete with newer competitors, Cisco has introduced a so-called software-defined network technology, called Application Centric Infrastructure. It is sold as part of new hardware, and is marketed as an innovation that can help automate the management of networks, storage and security services.

While staying on as chairman, Chambers said he planned to step back. "Chuck," he said, referring to Robbins, "will be the CEO, he'll make the decisions." Chambers said he was looking forward to "the next stage of my career, being more of a coach."

©2015 The New York Times News Service