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Behind the scenes, Cisco Systems ( CSCO ) did what it was supposed to do last quarter, and did it a little more profitably: It provided reliable networking gear and helped others compute and communicate faster, even as formerly highflying enterprise technology stocks crashed. After Wednesday’s close, Cisco posted fiscal Q2 earnings and sales that beat analyst expectations, as did its earnings and sales outlook for the current quarter. The company’s CEO, however, acknowledged that things have been a bit dicey. While the first 10 weeks of the second quarter, through Dec. 31, were “very much in line with what we expected … (in) those last three weeks (through Jan. 23), we saw customers just pause a bit … to see what’s going on,” Cisco CEO Chuck Robbins said on the company’s earnings conference call with analysts. “The (data center) campus refresh activities, we saw customer say, ‘Hey, our infrastructure is working. Let’s hold on that (purchase) before we see which way we’re willing to go.’ ” Added CFO Kelly Kramer: “Our guidance is prudent. We expanded our range to three (percentage) points of range rather than two, because we see things as more volatile.” For the period ended Jan. 23, Cisco said per-share earnings minus items rose 7.5% from the year-earlier quarter to 57 cents minus items, while revenue slipped 1% to $11.8 billion. Excluding year-earlier performance from the television set-top box business Cisco recently sold, revenue rose 2% . Analysts polled by Thomson Reuters had expected 54 cents and $11.75 billion. A year before, Cisco’s EPS ex items had risen 13% to 53 cents, and sales grew 7% to $11.94 billion. Cisco completed the sale of its Technicolor set-top box unit on Nov. 20, for $600 million. Excluding that business, Cisco had guided Q2 adjusted EPS to 53-55 cents, on revenue of flat-to-2% growth. For fiscal Q3, Cisco guided to EPS ex items of 54 cents to 56 cents and to a year-over-year revenue rise of 1% to 4%. Analysts had modeled 54 cents and a 0.8% decline. Cisco is the No. 1 maker of the seldom-seen but increasingly used, lightning-fast switches, routers and other networking gear behind most telecom and Internet service providers, helping to run many data centers for many Internet cloud-based operations. Cisco stock was up 9% in after-hours trading, after the company released its earnings. In Wednesday’s regular session, shares fell 0.6% to 22.51, 25% off an eight-year high of 30.31, set last March. Smaller rival Juniper Networks ( JNPR ) was up 1.5% after hours, having fallen 1.7% to 21.62 in Wednesday’s regular session. Cisco’s latest results helped the outlook for information technology stocks, which crashed last week after data analytics software maker Tableau Software ( DATA ) and social media firm LinkedIn ( LNKD ) gave disappointing guidance. As global fears of a slowing economy rose, so did worries of slower IT spending. Analytics firm Splunk ( SPLK ), security vendor Palo Alto Networks ( PANW ) and cloud software leader Salesforce.com ( CRM ) were among stocks that fell hard last week, though the latter two have recovered somewhat this week. Splunk and Palo Alto were up a fraction after hours Wednesday, but Tableau and Salesforce were down a fraction. Cisco: Challenging Macroenvironment “We delivered a strong Q2 and are managing the business extremely well in a challenging macro environment,” Robbins said in the company’s earnings release. “We’re managing the company on two fronts. We’re focused on continued strong execution in the near term, while investing in the innovation to lead our customers into the future.” As with the sale of its set-top box business, Cisco has been shedding slow-growth lines of business while making acquisitions in faster-growing arenas. Last week, Cisco announced its agreement to acquire Jasper Technologies, which delivers a cloud-based Internet of Things (Iot) service platform, for $1.4 billion. The deal is expected to close this fiscal quarter. The company last quarter also completed the purchases of Portcullis, a digital security operation; Lancope, a security analytics firm; ParStream, another analytics specialist; and 1 Mainstream, an on-demand streaming-content company. And on the call, Cisco executives said they recently completed the acquisition of Acano to help accelerate Cisco’s collaboration strategy to deliver video more broadly. In November, Cisco entered a “strategic partnership” with Ericsson ( ERIC ) which both companies say will improve their sales by the second half of this fiscal year. Robbins told analysts that Cisco and Ericsson “have begun to close transactions together. I would not translate that to any of the numbers we put out today. … We’re at the handful stage right now, but we see that accelerating.” “We delivered a strong Q2, and are managing the business extremely well in a challenging macro environment,” Cisco CEO Chuck Robbins said in the earnings release. “We’re managing the company on two fronts. We’re focused on continued strong execution in the near term while investing in the innovation to lead our customers into the future.” Scalper1 News
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