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Cisco second-quarter forecast disappoints; shares fall

Cisco second-quarter forecast disappoints; shares fall
FILE PHOTO: A man passes under a Cisco logo at the Mobile World Congress in Barcelona, Spain February 25, 2019. REUTERS/Sergio Perez -
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SERGIO PEREZ(Reuters)
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(Reuters) – Cisco Systems Inc on Wednesday forecast second-quarter revenue and profit below estimates as the network gear maker struggles to shift to a software-focused company from its business of selling routers and switches, sending shares down 4%.

Analysts have been worried about the impact of the U.S.-China trade war on the company’s sale of switches and routers, as some of these are made in China.

Cisco had said in the last quarter that U.S. tariffs and Chinese customers shunning its network gear was hurting its business.

The company said it expects revenue in the current quarter to drop by 3% to 5% from a year earlier to between $12.07 billion to $11.82 billion. Analysts were expecting revenue of $12.77 billion, according to IBES data from Refinitiv.

The company has been moving its focus to newer areas such as software and cyber security to counter slowing demand for its routers and switches as companies increasingly opt for cloud-based services offered by Amazon.com Inc and Microsoft Corp.

Cisco expects profit on an adjusted basis to be between 75 cents and 77 cents per share in the current quarter, below analysts’ average estimate of 79 cents.

The gloomy outlook overshadowed first-quarter results, which beat expectations.

Total revenue in the quarter ended Oct. 26 rose nearly 1% to $13.16 billion, above expectations of $13.09 billion.

Excluding items, Cisco earned 84 cents per share and beat estimates of 81 cents.

(Reporting by Akanksha Rana in Bengaluru; Editing by Arun Koyyur)

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