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Cisco profit halved as revenue falls

The company's profit fell by 54 percent amid continuing woes

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

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 Jan. 25, Cisco reported revenue of US$11.2 billion and net income of $1.4 billion, or $0.27 per share. That profit figure was down 54.2 percent from $3.1 billion, or $0.59 per share, a year earlier. The results included a pre-tax charge of  $655 million related to the expected cost of remediation of issues with memory components in some routers and switches it no longer produces.

Not counting certain one-time items, Cisco reported net income of $0.47 per share, down 7.8 percent from $0.51 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.

Wednesday's 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 percent and 10 percent.

In December, the company cut its long-term revenue forecast. Over the next three to five years, revenue will rise by 3 percent to 6 percent 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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