Cisco Systems reported that net income was up 22% in its fiscal third quarter, compared to the same quarter last year. Cisco reported net income of $2.2 billion, or $0.40 a share, for the quarter ended April 30. This is up from net income of $1.8 billion, or $0.33 a share, a year ago. Company revenue was $11.6 billion, up from $10.9 billion last year. The results were slightly ahead of the forecast of surveyed analysts.
Cisco’s solid earnings report was mainly the result of job cuts and other corporate revamping undertaken over the past twelve months. Erik Suppiger, an analyst with JMP Securities, said, “Cisco keeps commenting that they’ll grow earnings faster than revenues, and technically that is true, but it’s because of the restructuring. I thought we’d see more leverage from that, but it’s not apparent in their outlook.”
The company’s results were helped by increased demand from Japanese telecommunications companies during the year after that country was devastated by a tsunami. However, Cisco’s relative strength in the industry could be taken as a sign of overall decline in demand during a worsening global economy.
Government purchases of Cisco’s computer networking products have declined substantially. The company has been facing hesitant corporate spending in many areas, a reaction mainly due to worries about Europe’s economic slowdown. Economic troubles in India and longer sales cycles worldwide have also contributed to a decline in sales.
Chief executive of Cisco Systems, John T. Chambers, had a dark outlook for the world economy. Mr. Chambers said, “We gave them somber news based on the uncertainty. It’s tough in the short term.”
Cisco is a bellwether for both the information technology sector and the overall market due to its dominant share of the computer networking market. Most of Cisco’s major competitors, including Juniper Networks, Alcatel and Huawei, had far worse performances in recent months.