Cisco profit halved as revenue falls

The company's profit fell by 54 per cent amid continuing woes

Cisco Systems reported another tough quarter, saying profits in its fiscal second quarter fell by more than half and revenue declined by nearly 8 per cent.

The dominant networking vendor had scaled back expectations for the quarter and for the coming year after a disappointing quarterly report last November. At that time, it cited uneven economic conditions around the world and transitions in some of its own product lines.

For the second quarter, which ended January 25, Cisco reported revenue of $US11.2 billion and net income of $US1.4 billion, or $US0.27 per share. That profit figure was down 54.2 per cent from $US3.1 billion, or $US0.59 per share, a year earlier.

Not counting certain one-time items, Cisco reported net income of $US0.47 per share, down 7.8 per cent from $US0.51 in last year's second quarter. Both that result and its revenue report slightly exceeded the consensus estimates by financial analysts polled by Thomson Reuters, which were made after Cisco had warned of a revenue drop in the quarter.

The results followed a gloomy first-quarter report that showed Cisco's revenue falling short of the company's own expectations and its profit declining from a year earlier. Right after posting those figures in November, Cisco warned that revenue in the second quarter would fall by between 8 per cent and 10 per cent.

In December, the company cut its long-term revenue forecast. Over the next three to five years, revenue will rise by 3 per cent to 6 per cent per year, Cisco Executive Vice President and Chief Financial Officer Frank Calderone told a financial analyst conference. The company had been expecting between 5 percent and 7 percent per year over the long term.

Macroeconomic factors loomed large in Cisco's account of the weak first-quarter results and forecast. Sales were dramatically lower in most of the company's most important developing markets, executives told financial analysts. But transitions in some product lines also hit sales, they said.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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