Cisco's forecast tops Wall Street estimates; shares rise

(Reuters) - Network equipment maker Cisco Systems Inc reported better-than-expected results and gave an upbeat forecast for the current quarter, sending its shares up about 7 percent in extended trading.

The Cisco Systems logo is seen as part of a display at the Microsoft Ignite technology conference in Chicago, Illinois, May 4, 2015. REUTERS/Jim Young/File Photo

The company has been beefing up its wireless security and datacenter businesses to offset the impact of sluggish spending by telecom carriers and enterprises on its main business of making network switches and routers.

Results in the latest reported quarter were mainly driven by a 17 percent jump in sales in its security business, which offers firewall protection as well as intrusion detection and prevention systems.

“Security is and will remain one of our absolute highest priorities,” Chief Executive Chuck Robbins said on a post-earnings conference call on Wednesday.

Revenue in the company’s collaboration unit, which sells IP phones, rose 10 percent in the third quarter ended April 30. Sales in the data center business, which makes servers, rose 1 percent.

The company’s legacy switches and routers business is still by far its largest, accounting for nearly 60 percent of total revenue.

Sales in the switching unit fell 3 percent, while router sales fell 5 percent, painting a grim picture of corporate technology spending.

“Security and Collaboration were definitely the bright spot. But I am really concerned about the switching and routing business. They are the company’s biggest and important units,” Needham Co analyst Alex Henderson said.

Cisco said it expects an adjusted profit of 59-61 cents per share and revenue to range from flat to up 3 percent.

Analysts on average had expected a profit of 58 cents, according to Thomson Reuters I/B/E/S. On revenue, analysts had projected a 3 percent decline.

Henderson said the outlook seemed cautious. “What they are basically saying is they do not see any significant improvement in economic slowdown.”

The company’s net profit fell to $2.35 billion, or 46 cents per share, in the third quarter, from $2.44 billion, or 47 cents per share, a year earlier.

Excluding items, the company earned 57 cents per share.

Analysts on an average had expected a profit of 55 cents per share and revenue of $11.97 billion.

Revenue fell to $12.00 billion from $12.14 billion.

Reporting by Rishika Sadam in Bengaluru; Editing by Saumyadeb Chakrabarty