Cisco Systems Inc.’s recent growth pace eased a bit in the latest quarter, but the network-equipment giant and its new chief executive said the company’s recent rebound remains on track.
The Silicon Valley company Wednesday said net income rose 3.2% in the fourth fiscal period ended in July, while revenue grew 3.9%
The company also forecast revenue growth for the first quarter of 2% to 4%, as well as adjusted earnings per share of 55 cents to 57 cents. Analysts polled by Thomson Reuters expect 3% growth and 56 cents of earnings.
Chief executive Chuck Robbins, overseeing the company’s earnings announcement for the first time after succeeding longtime CEO John Chambers, characterized the results as strong, noting that he was "particularly pleased with the strong growth of deferred revenue, which shows we are very effectively driving our business to a more predictable software-based business model."
Cisco in May had reported a 12% increase in third-quarter profit on a 5% increase in revenue.
The company, based in San Jose, Calif., is the biggest maker of hardware that connects computers to each other and to the Internet. The company, which often experiences boom and bust cycles ahead of other technology vendors, has long been considered a bellwether for corporate demand.
Until recently, Cisco was grappling with sales declines in its two biggest hardware businesses, switching and routing systems. But new product lines have spurred a rebound in sales in those categories. Cisco said Wednesday that switching revenue grew 2% in the fourth period, while router sales grew 3%.
China has been another problem. Cisco faces tough competition there from local suppliers that include Huawei Technologies Co. Cisco and other technology suppliers have also been hurt by suspicions about their links to U.S. intelligence agencies.
Mr. Robbins has moved to dispense with nonperforming businesses to concentrate on what is likely to show profitable growth. Cisco, for example, last month said it would sell its TV set-top box unit to Technicolor SA for $600 million, a key part of $6.9 billion acquisition a decade earlier.
The decision to divest that business reflects Cisco’s struggles in video equipment sold to cable operators, where revenues have been falling lately. Cisco intends to stop selling equipment used in homes but keep equipment used in corporate offices.
The company said Wednesday that fourth-quarter revenue in its service provider video declined 7%, compared with a 5% decline in the third period.
In all, Cisco on Wednesday reported profit in the fourth quarter ended July 25 of $2.32 billion, or 45 cents a share, compared with profit the prior year of $2.25 billion, or 43 cents a share. Revenue rose to $12.84 billion from $12.36 billion.
Cisco said per-share earnings were 59 cents on adjusted basis that excludes stock-based compensation and other items, up from 55 cents in the year earlier period. On that basis, analysts had polled by Thomson Reuters had expected earnings of 56 cents a share on revenue of $12.65 billion.