Cisco Beats Estimates With 5.5 Percent Revenue Decline

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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The network equipment maker’s shares rose in after-hours trading, as it reported recovering demand in developed markets and a revenue decline that was less than analysts had expected

Cisco on Wednesday reported a 5.5 quarterly decline in revenues, but the drop was less than financial analysts had expected, buoyed by strong demand in developed markets including the US and Northern Europe. Investors applauded the results, with Cisco’s shares rising more than 6 percent in after-hours trading.

The network equipment maker reported $11.5 billion (£7.2bn) in revenues for its third fiscal 2014 quarter, 5.5 percent down compared to the previous quarter but higher than the $11.3 billion analysts had expected.
Cisco CEO

SDN competition

US product orders rose by 7 percent year-on-year, including a 10 percent rise in enterprise and commercial orders, while demand from Northern Europe grew by 4 percent in the same period.

Those strengths helped offset slower demand in emerging regions, where orders fell 7 percent overall, with Brazil declining by 27 percent and Russia by 28 percent.

Cisco has faced pressure recently with the emergence of software-defined networks (SDN), which allow networks to run on commodity hardware, but highlighted growing support for its Application Centric Infrastructure (ACI) initiative, which it is positioning as an alternative to SDN.

The company last month unveiled OpFlex, a standards-based protocol that would play the same role as the OpenFlow SDN protocol, and on Wednesday said that its new range of Nexus 9000 switches, which support ACI, grew to 175 customers from 20 in the previous quarter.

“The traction we are seeing with application-centric solutions gives me confidence that we are leading the disruption of SDN,” said Cisco chief executive John Chambers (pictured) in a statement.

‘Clear progress’

He said that, overall, the company has “demonstrated clear progress on returning to growth”.

Cisco said its gross margins were 62.7 percent for the quarter, up from 53.3 percent in the previous quarter and surpassing expectations of 61 to 62 percent, which industry observers said should reassure investors over concerns that the company’s business is being commoditised by the likes of SDN.

Net profit was $2.2bn, down from $2.5bn a year ago, with non-GAAP earnings at 51 cents per share, above the forecast of 48 cents.

Cisco is currently working with AT&T, GE, IBM and Intel on building cloud infrastructure for the “Internet of Everything” in what it calls the Industrial Internet Consortium, and has recently moved into new areas including a managed security service.

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