Cisco Rises as Sales Top Estimates on Americas Growth

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Cisco Systems Inc. rose the most in six months after fiscal fourth-quarter revenue beat analysts’ estimates as the network-equipment maker relied on strong sales in the Americas and faster growth in servers for data centers.

Sales increased 3.9 percent to $12.8 billion in the quarter ended July 25, with profit before certain costs of 59 cents a share, Cisco said Wednesday in a statement. Analysts projected sales of $12.7 billion and profit of 56 cents, according to the average of estimates compiled by Bloomberg.

The shares rose 2.9 percent to $28.70 at the close in New York, the biggest one-day gain since Feb. 12. Cisco is up 3.2 percent this year.

The results also were in line with Cisco’s forecast for the quarter. Jayson Noland, an analyst at Robert W. Baird & Co., said the network-equipment maker set achievable targets to make good on promises of a smooth transition from longtime Chief Executive Officer John Chambers to Chuck Robbins, who took over July 26.

“There’s no reason they would want to risk a miss right out of the gate,” said Noland.

Cisco forecast that revenue will increase 2 percent to 4 percent, or $12.5 billion to $12.7 billion, in the current quarter from a year earlier. Profit, excluding some items, will be 55 cents to 57 cents a share. Analysts estimated sales of $12.6 billion and profit of 56 cents.

Net income in the quarter was $2.32 billion, or 45 cents a share, compared with $2.25 billion, or 43 cents, a year earlier.

Americas’ Effort

The San Jose, California-based company benefited from continued sales strength in the Americas, where revenue increased 7 percent from a year earlier.

“The Americas was definitely the star,” said Jason Noah Ader, an analyst at William Blair & Co.

The collaboration business, which includes the Webex conferencing service and videoconferencing equipment, grew 14 percent. That matched the 14 percent sales increase in Cisco’s data-center server unit, which has been its fastest growing product category.

Robbins has earned praise from analysts for shaking up Cisco’s veteran management team and selling a faltering cable set-top box unit since being named heir apparent in May.

The company still faces a battery of long-term threats. Many phone companies and large corporations are interested in using networks that are more software-driven, rather than relying on expensive, proprietary hardware such as that made by Cisco. Businesses also are outsourcing their networking needs to cloud-computing companies including Inc. and Google Inc.

Competitors’ Moves

Rivals such as Arista Networks Inc. also have had success selling network switches to the Internet giants for use in their data centers.

“Cisco needs to do better in the cloud,” Noland said.

The company didn’t announce any year-end job cuts for the first time in four years. Cisco eliminated more than 20,000 jobs in that period, as it struggled with rising competition, and declining sales to phone companies and in emerging markets.

At the same time, the company added employees in growth businesses such as security and servers. Cisco had 71,833 employees at the end of the fiscal third quarter, the company said Wednesday.