Chuck Robbins, CEO of Cisco Technologies Inc., speaks at a panel session at the World Economic Forum (WEF) in Davos, Switzerland, on Tuesday, January 17, 2017. World leaders, influential executives, bankers and policymakers attend the 47th annual meeting of the World Economic Forum in Davos from January 17-20.
Jason Alden | Bloomberg | Getty Images
Cisco shares plunged 5% in expanded trading on Tuesday after the company posted second-quarter fiscal results that showed ongoing problems in its top product segment. Still, the company’s results and quarterly advice exceeded analyst estimates.
This is how the company did it:
- Merits: Adjusted 79 cents per share versus 76 cents per share as expected by analysts, Refinitiv said.
- Revenue: $ 11.96 billion, versus $ 11.92 billion as expected by analysts, according to Refinitiv.
Overall, Cisco sales declined slightly year-on-year in the quarter, which ended Jan. 23, according to a statement. Sales declined for the fifth consecutive quarter. The weaker economy has dampened the company’s growth prospects as well as some customers’ decisions to tap into cloud services to keep employees working efficiently while staying at bay during the coronavirus pandemic.
In the company’s leading product segment, Infrastructure Platforms, which includes sales of data center network switches and routers, Cisco generated $ 6.39 billion in revenue, down 3% year-on-year and above consensus of $ 6.23 billion among analysts polled by FactSet.
“The corporate market remains weak, driven by some long-drawn-out sales cycles and an ongoing pause in spending at some customers due to the pandemic,” Cisco CEO Chuck Robbins told analysts in a conference call. While switch revenues were flat, revenues from routers and servers went down.
The Applications unit, including Webex video calling products, delivered $ 1.35 billion in revenue, stable year over year and just below FactSet’s consensus estimate of $ 1.40 billion. Webex now has 600 million “quarterly average users,” said Robbins.
Robbins pointed to the momentum among web-scale customers operating large-scale data centers. About a quarter of Cisco’s service provider’s revenue in the quarter came from web customers, he said.
In the quarter, Cisco increased its bid to purchase network hardware company Acacia Communications from $ 2.6 billion to $ 4.5 billion. The company also announced that it planned to acquire cloud communications software maker IMImobile for $ 730 million, and introduced third-party tool integrations for Webex.
Regarding the guidelines, Cisco said it expects 80 cents to 82 cents of adjusted earnings per share with sales growth of 3.5% to 5% in the fiscal third quarter. Analysts polled by Refinitiv had expected 81 cents in adjusted earnings per share and $ 12.35 billion in revenue, which would equate to 3% revenue growth. The quarter includes an extra week.
Cisco is concerned about its supply chain, reflecting wider concerns about chip shortages, said Scott Herren, the company’s chief financial officer.
“We are contacting all of our main suppliers in this area,” said Herren. “We’re taking kind of the volume purchases that we have by further expanding that supply chain, all with the goal of making sure we can protect shipments from customers. So there’s a little bit of headwind coming into those lines from just the current offering. chain. “
Excluding the after-hours move, Cisco shares are up about 9% since the start of the year, while the S&P 500 index is up 4%.
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WATCH: Cisco CEO Chuck Robbins thinks about navigating complicated times