CORRECTED: Cisco profit beats on strength in security business

By Salvador Rodriguez

(Reuters) - Cisco Systems Inc reported a better-than-expected quarterly profit on Wednesday, driven by gains from its newer businesses such as security, which more than offset the declines in its traditional switches and routers business.

The world's largest network gear maker forecast second-quarter adjusted profit of 58 cents to 60 cents per share, largely above analysts' estimate of 58 cents, according to Thomson Reuters I/B/E/S.

The company's shares rose nearly 3.8 percent to $35.40 in after-hours trading.

"Cisco has been shifting its business model towards subscriptions, especially in the faster-growing segments like security," said Tim Green, analyst with the Motley Fool. "That effort may be starting to bear fruit."

 

Revenue from Cisco's security business, which offers firewall protection and breach detection systems, rose 8 percent to $585 million.

Cisco has shifted its focus to newer high-growth areas such as security, Internet of Things and cloud computing like other legacy technology companies.

Net income rose to $2.39 billion, or 48 cents per share, in the first quarter ended Oct. 28, from $2.32 billion, or 46 cents per share, a year earlier.

Cisco forecast a revenue increase of 1 to 3 percent for its second quarter, which would end a streak of eight quarters of year-to-year decline.

"The forecast is better than feared and speaks to a company that has started to turn the corner," said Daniel Ives at research firm GBH Insights.

Excluding items, the company earned 61 cents per share. Revenue fell 1.7 percent to $12.14 billion.

Analysts on average had expected a profit of 60 cents per share on revenue of $12.11 billion.

(In eighth paragraph, fixes corrects to say eight quarters of year-to-year decline from four.)

(Reporting by Salvador Rodriguez in San Francisco and Laharee Chatterjee in Bengaluru; Editing by Shounak Dasgupta and Richard Chang)