Sagging offshore sales pinch Cisco earnings

By Penny Yi Wang

(Flickr Creative Commons By Mark Tighe)
Cisco’s high speed broadband router has long been a market leader (Flickr Creative Commons By Mark Tighe)

Cisco Systems Inc., reported a fiscal first quarter profit decline in line with expectations  and reiterated a flat outlook, as emerging markets — which earlier fueled the Internet-equipment maker’s growth — continue to soften.

For the quarter ended on October 25, net income of the router maker declined 8.4 percent to $1.83 billion, or 35 cents per diluted share, from $2.00 billion, or 37 cents per diluted share in the same quarter last year.

Sales inched up by 1.3 percent to $12.26 billion from $12.09 billion in a year-ago period.

Excluding restructuring costs, the company reported diluted earnings per share of 54 cents, up slightly from 53 cents a year ago. The latest per share earnings beat Wall Street expectations by one penny.

Once a dominant player in Internet communication infrastructure products and services, Cisco is facing a tough time as the technology landscape transforms and as overseas markets weaken.

During a conference call, company officials forecast that second-quarter earnings are expected to land in a range of 50 cents to 52 cents per share. “Our guidance does not assume a significant improvement in the emerging markets was a service provider segment in the near future,” warned Chief Financial Officer Frank Calderoni.

Market orders from the Asia Pacific shrank 12 percent, led by China’s 33 percent decline, in the last quarter compared to the same period a year ago. Despite modest increase in Americas and Europe, overall orders crawled up a mere one percent.

The company’s service segment dropped ten percent globally, led by an 18 percent drop in the U.S.

“We are pleased that in spite of the headwinds, we are growing again,” said Chairman and Chief Executive Officer John Chambers.

Recent cloud technology advances also pressures Cisco to adapt to the climate. The company aims to integrate its existing systems with the industry’s most recent trend.

But “The company is clearly succeeding where IBM and Oracle have been faltering,” said Mark Vickery from Zacks Investment Research.

In early Nasdaq trading Thursday, Cisco shares climbed jumped more than 2 percent to trade at $25.68.