Cisco to Break 2-Year Streak of Declining Sales

The company's shares rise nearly 6% as it predicts revenue will rise 1% to 3% in the next quarter.
Matthew HellerNovember 15, 2017
Cisco to Break 2-Year Streak of Declining Sales

Cisco Systems shares rose nearly 6% on Wednesday after the network equipment maker reported better-than-expected quarterly earnings as it continues its shift from hardware to high-margin businesses.

For the first quarter, Cisco’s revenues fell 2% year on year to $12.136 billion. But that beat analysts’ estimates of $12.11 billion and was a slight improvement on the previous quarter’s $12.133 billion.

Adjusted earnings per share were $0.61, just ahead of estimates of $0.60 per share.

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The company also predicted it revenue growth of 1% to 3% in the second quarter, which would break a two-year streak of declining revenue. In after-hours trading Wednesday, its stock gained 7.8% to $36.11.

“Our results in Q1 demonstrate the continued progress we’re making on our strategy,” Cisco CEO Chuck Robbins said in a news release. “The network has never been more critical to business success. Cisco is delivering more insights and intelligence as we help our customers build highly secure, intelligent platforms for digital business.”

As The Financial Times reports, “Cisco has been transitioning away from hardware like switches and routers to high-margin areas like software and subscriptions.” The company said last month it was partnering with Google to boost its cloud offerings and, under Robbins, it has gone on an acquisition spree and cut more than 6,500 jobs.

Cisco’s infrastructure segment, which includes switches and routers, saw revenue decline 4% to $6.97 billion in the first quarter. In the applications segment, consisting primarily of software products from Cisco’s $3.7 billion acquisition of AppDynamics, revenue was up 6% to $1.203 billion.

Of the other segments, security products’ revenue rose 8% to $585 million, other products fell 6% to $296 million, and services edged up 1% to $3.082 billion

“We delivered a solid Q1 and executed well as we focus on strategic priorities and maintaining rigorous discipline on profitability and cash generation,” CFO Kelly Kramer said. “We delivered strong growth in operating and free cash flow, focused investments on long term profitable growth, and returned $3.1 billion to shareholders through repurchases and quarterly dividends.”