Cisco Systems shares jumped 7 percent to $24.53 in after-hours trading Wednesday, after the San Jose, Calif.-based company reported third-quarter earnings that beat analysts' expectations and included a better-than-expected fourth-quarter outlook.
For its third fiscal quarter, ended April 26, Cisco reported a revenue of $11.5 billion, down 5.5 percent from the $12.2 billion it reported during the same period last year. The drop, however, isn't as drastic as the 6 percent to 8 percent decline Cisco projected last quarter. According to Thomson Reuters, Cisco also topped analysts' estimates, which were $11.3 billion in revenue.
Cisco said its net income for the third quarter was $2.2 billion, down 12 percent from the $2.5 billion it reported during the same quarter last year.
Looking ahead, Cisco anticipates its revenue loss to narrow in the fourth quarter to between 1 percent and 3 percent.
Cisco has reported a year-over-year profit drop for the past three quarters, attributing the decline to sluggishness in emerging markets and the service provider segment. But CEO John Chambers said Wednesday the networking giant's third-quarter results suggest it's back on track to growth.
"We are very focused on creating value for our shareholders, employees, customers and partners. Our conviction around how we are evolving Cisco is strong and resolute," Chambers told analysts on a conference call. "You'll see us deliver incredible innovation, make bold moves in the market to capture future opportunities, and disrupt our competitors and ourselves when necessary."
"The Nexus 9000 and Application-Centric Infrastructure, while still early, is gaining significant market traction," Chambers said. "In just our second quarter shipping new Application-Centric Infrastructures, i.e., ACI-enabled platforms, specifically the Nexus 9000, we grew from 20-plus customers last quarter to 175 customers this quarter with a pipeline approaching 1,000 customers. We saw major wins, including competitive wins and displacements, in large financial institutions, large cloud providers, Software-as-a-Service [providers] and major service providers."
In the third quarter, Cisco's U.S. enterprise and commercial businesses each grew more than 10 percent. Chambers said in the U.S. enterprise, specifically, deals valued at more than $1 million grew over 25 percent from the start of Cisco's third quarter to the start of its fourth.
Product orders for Cisco's service provider and emerging markets segments, meanwhile, were down 5 percent and 7 percent, respectively. As with the past two quarters, Chambers attributed the sluggishness in Cisco's service provider business to customer transitions to new Cisco service provider platforms like NCS happening at a slower pace than expected.
Chambers said it will likely take several quarters for these segments to return to growth.
As for product groups, Cisco's data center revenue was up 29 percent year-over-year, riding strong sales of Cisco's Unified Computing System (UCS) converged infrastructure offering. Chambers said UCS has gained market share for 17 consecutive quarters since its launch in 2009.
Cisco's Sourcefire acquisition continued to pay off in the third quarter, with revenue growing 10 percent year-over-year. Wireless revenue was up 3 percent, thanks largely to Cisco's cloud-based Meraki platform, Chambers said.
Cisco said collaboration revenue in the third quarter was down 12 percent year-over-year, while NGN routing was down 10 percent, and overall switching revenue was down 6 percent.
Chambers said Cisco will continue to make "bold moves" in the market, including those around its recently unveiled InterCloud hybrid cloud strategy. He noted that Cisco has already announced several major hosting partners for InterCloud, and that more will be named next week at Cisco Live.
"Customers, providers and channel partners are turning to Cisco to create and open highly secure hybrid cloud environments," Chambers said.
PUBLISHED MAY 14, 2014