strong U.S. sales, popular Nexus product raise revenue
Send a link to a friend
[May 15, 2014]
By Marina Lopes
NEW YORK (Reuters)
— Network equipment maker Cisco Systems Inc posted a
shallower-than-expected 5.5 percent drop in quarterly revenue, as
recovering demand in regions like the United States and Northern
Europe helped offset sluggish sales in emerging markets.
The company posted gross margins of 62.7 percent in its fiscal third
quarter, up from 53.3. percent in the previous quarter and above
guidance of 61 to 62 percent.
Cisco's key server business has grappled with competition from
so-called software-defined networks (SDN) , which offer software
that can run on cheap hardware. Lately it has been gaining some
traction in that battle thanks to its Nexus 9000 switches, which can
adapt to flows in workloads brought on by cloud computing, and big
"It is about as solid of a quarter as you can expect," said analyst
Zeus Kerravalla at ZK research.
"Seeing gross margin get back up above 62 percent is certainly good
news for investors and should help alleviate some of the concern
that their business is being commoditized," he said.
Total U.S. product orders rose 7 percent from one year ago, with
enterprise and commercial orders rising more than 10 percent. Order
strength in northern Europe was up 4 percent year-over-year.
Yet in emerging markets, where Cisco faced increased competition,
orders fell 7 percent, with Brazil down 27 percent and Russia down
Nexus 9000 grew to a user base of 175 customers, up from 20
customers last quarter.
"The traction we are seeing with application-centric solutions gives
me confidence that we are leading the disruption of SDN," said
Cisco's Chief Executive Officer John Chambers.
Chambers said the company's book-to-build ratio, the ratio of orders
received to units shipped and billed, was "comfortably above one,"
indicating strong demand.
[to top of second column]
The company gave forecasts of earnings per share of 51 cents to 53
cents, and a gross margin of 62.7 percent for the fourth quarter.
Shares rose in after hours trading to $24.39 from a $22.80 close on
Cisco had a net profit of $2.2 billion in the fiscal third quarter,
down from $2.5 billion in the year-ago quarter.
Non-GAAP earnings of 51 cents per share exceeded the consensus
forecast of 48 cents.
The company increased its cash dividend in the third quarter to
$0.19 per common share.
Cisco reported revenue of $11.5 billion, down from $12.2 billion a
year earlier. Wall Street on average had expected $11.36 billion,
according to Thomson Reuters I/B/E/S.
(Reporting by Marina Lopes; Editing by Richard Chang and Cynthia
[© 2014 Thomson Reuters. All rights
Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.