February 13, 2019 / 9:14 PM / 8 months ago

Newer businesses drive Cisco's earnings beat; shares rise

(Reuters) - Cisco Systems Inc reported better-than-expected quarterly earnings on Wednesday, as it benefited from strength in its newer applications and security businesses, while shrugging of the impact of a U.S.-China trade war on its networking gear business.

FILE PHOTO: The logo of U.S. networks giant Cisco Systems is seen at their headquarters in Issy-les-Moulineaux, near Paris, France, April 3, 2018. REUTERS/Philippe Wojazer/File Photo

Shares of the Dow component rose about 4 percent in extended trading after the network gear maker also forecast third-quarter earnings above analysts’ estimates and boosted its share buyback program and quarterly dividend.

Analysts have been worried about the impact of the trade war on Cisco’s traditional business of selling switches and routers, as some of these are made in China. But those concerns were brushed aside by Chief Executive Chuck Robbins who said demand was steady through the quarter.

“It certainly is one of the more complex macro geopolitical environments that I think we’ve seen in quite a while with all the different moving parts,” Robbins said.

“But to be honest, from the first day of the quarter to the last day of the quarter, we saw zero difference.”

Robbins, who took the helm in July 2015, has made acquisitions a central part of his efforts to add muscle to the hardware giant’s newer growth areas such as the cloud, internet of things and cyber security.

Under Robbins, Cisco has pivoted to software and cyber security to make up for slowing demand for its routers and switches as companies increasingly shift to cloud services offered by Amazon.com Inc, Microsoft Corp and Alphabet Inc instead of building their own networks.

“Strong growth in areas like security and software-defined networking are indicative of Cisco staying a leader in nascent technologies and possibly turning into more spend per customer or opening up new opportunities,” Morningstar analyst Mark Cash said.

The company said it expects third-quarter revenue growth of 4 percent to 6 percent, implying a range of between $12.96 billion and $13.21 billion. Analysts were expecting $12.84 billion.

In the latest quarter, revenue from its application software businesses rose 24 percent to $1.47 billion.

Security business, which sells firewall protection and breach detection systems, also posted an 18 percent jump in sales to $658 million.

Sales in its infrastructure platform business, which includes the company’s traditional business of switches and routers, rose 6 percent to $7.13 billion.

Total revenue rose 4.7 percent to $12.45 billion in the second quarter, above analysts’ expectations of $12.41 billion.

On an adjusted basis, the company earned 73 cents per share, beating estimates of 72 cents per share.

Reporting by Arjun Panchadar in Bengaluru; Editing by Anil D'Silva

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