Enterprise demand for Cisco’s networking gear is more than offsetting any weakness in the service-provider segment. The company said yesterday that revenue for the most recent quarter was up 7% year-on-year, while net income shot up 67%.
Cisco sold $11.9 billion worth of products and services during the most recent quarter, beating Wall Street’s expectations by $100 million. Net income was $2.4 billion, and earnings per share were 53 cents for the quarter. Cisco is increasing its quarterly dividend by 2 cents per share.
Cisco’s higher net income is partially due to cost cuts; the company has slashed its headcount in recent years. In 2011 Cisco announced 11,500 job cuts, followed by 4,000 cuts announced in 2013 and 6,000 last year.
“Wireless was strong as a product refresh contributes along with Meraki,” noted analyst Simon Leopold of Raymond James Equity Research. Cisco spent more than $1 billion to buy Wi-Fi access point maker Meraki in 2013. This month, Meraki’s three founders abruptly left Cisco.
Routers are a core business for Cisco, and router sales have been under pressure as operators delay refreshes while they evaluate virtualized solutions. The outlook for Cisco’s sales to wireless service providers is less robust than the outlook for sales to enterprise customers.
“Service providers remain a challenge as evident in weak routing results barely up year-on-year and down quarter-on-quarter, and likely stays that way for quarters,” said Leopold. “Globally, enterprise orders grew 10% year-on-year. Service provider video, down 19% year-on-year, remains difficult and with 6% year-on-year growth, we considered security disappointing.”
