Cisco Profit Rises 14.5% (NASDAQ:CSCO)

ciscoCisco Systems reported that its net income increased 14.5 percent compared with a year earlier, to $2.5 billion, or 46 cents a share. Revenue increased by 5.4 percent, to $12.2 billion. Cisco had net income of 51 cents a share by the nonstandard accounting measures popular with many tech companies. This was up 6.3 percent from the same quarter a year earlier. Analysts had estimated net income of 49 cents a share and revenue of $12.18 billion. Cisco is the world’s largest maker of networking gear.

Cisco announced that its sales of switches and routers were flat in its third fiscal quarter. However, sales were substantially higher for equipment for big cloud-computing data centers, video systems and wireless systems. In recent years, the company has moved into technologies like online video, cloud computing and the wireless delivery of high-speed Internet. John Chambers, Cisco’s chief executive, said, “This is where the action is. We bet on some of these seven years ago, now they’re paying off.”

Cisco now plans to diversify into building sophisticated networked systems with many parts. It would mean even more Internet traffic from sensors, consumer devices, and industrial products to and from the Internet and could prompt growth in its main switching and routing businesses. Because they make up nearly half of its revenue, Cisco needs to revive those businesses.

Sales of switching gear dropped 2 percent compared with the same quarter a year ago. Router sales were flat. Sales of video equipment increased by 30 percent. Wireless equipment sales rose 27 percent. Sales of data center gear rose 77 percent. The total revenue of these other businesses was about half that of switches and routers. Eric Suppinger, an analyst with JMP Securities, said, “The new products got them out of what looked like a tough quarter,”.

Cisco’s North American sales increased by 10.4 percent, to $7.1 billion. Sales in Europe were lower, primarily due to weakness in countries like Spain. Mr. Chambers described the business environment in North America as “slow but steady,” and said, “You’re beginning to see Europe bottom out, with the exception of the south.”