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(Bloomberg) – Cisco Systems Inc. has released a bullish sales and profit forecast for the current period, a sign that companies continue to spend on their computer networks, while a trade dispute between China and the United States will slow down global economic growth.
Fourth-quarter fiscal sales will increase 4.5% to 6.5% from the same period last year, the company's San Jose, California-based company said Wednesday. This represents sales of up to $ 13.5 billion, compared with an average estimate of $ 13.29 billion from analysts. Adjusted earnings will be 80 to 82 cents per share, in line with expectations of 81 cents.
Cisco, whose equipment is the backbone of the Internet and corporate networks, has returned to growth by modernizing its existing products and adding new software and services as part of its ongoing expansion. a restructuring of Chief Executive Officer Chuck Robbins. The company's forecasts could help defuse fears that companies are less and less willing to invest in new equipment while trade tariffs between the two largest economies in the world are being addressed. a fear.
Cisco's outlook takes into account the possibility that the United States is responding to its threat to levy a 25% tariff on a variety of products made in China, Robbins said.
"We are proud of what teams have achieved in a very complex world, but it will remain a complex world," said the CEO during a phone interview. The company has experience in moving its manufacturing sites and has done the necessary work to mitigate the impact of higher rates, he said.
Cisco said orders were increasing, particularly from security customers, because of the work done over the past two years to reorganize its products. This has made the offerings better suited to the more complex networking and computing needs of companies, which use both internal networks and outsourcing, Robbins said.
Cisco shares rose about 3% in prolonged trading. The stock, which grew more than 20% this year, rose less than 1% to $ 52.44 at the close in New York.
In the third quarter of the fiscal year ended April 27, net income reached $ 3.04 billion, or 69 cents per share, compared to $ 2.69 billion, or 56 cents, a year earlier. Revenues climbed to $ 13 billion. Cisco reported a profit of 78 cents per share, with the exception of some items, against an average estimate of 77 cents by analysts, according to Bloomberg data.
By region, the Americas led the quarter with a 9% increase in sales over last year, excluding discontinued operations, to $ 7.7 billion. Europe was also up 5%. Cisco's security revenue jumped 21 percent from a year ago to $ 707 million. Hardware grew by 5% and software by 9%.
Cisco's status as the leading manufacturer of routers, switches, and other equipment used to connect computers means that its revenues are considered a general indicator of the company's spending plans. The company only gets a small percentage of China's sales, where it has been largely closed to the market, and could be a beneficiary of the ongoing trade dispute, which includes the US government's attempts to block equipment purchases from one of its partners. Major rivals, Huawei Technologies Co. Nevertheless, if business spending is held back by a general economic slowdown caused by trade uncertainty, Cisco sales could be affected, analysts said.
Under Robbins' leadership, Cisco has made a series of acquisitions to bring software and services to reduce the company's dependency on hardware. It attempts to generate more predictable recurring revenue by offering customers the ability to remotely manage and monitor their networks to make them more efficient and secure.
The Cisco leader said the transformation would take time as many new offerings force customers to opt for newer hardware that supports advanced features and services.
(Updates with CEO comments in fourth paragraph.)
To contact the reporter about this story: Ian King in San Francisco at [email protected]
To contact the editors in charge of this story: Jillian Ward at [email protected], Andrew Pollack
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