Cisco's profit forecast misses estimates, shares slip

November 16, 2016 4:18 PM EST

A visitor walks past a Cisco advertising panel as she looks at her mobile phone at the Mobile World Congress in Barcelona February 27, 2014. REUTERS/Albert Gea/File Photo

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By Aishwarya Venugopal

(Reuters) - Cisco Systems Inc (NASDAQ: CSCO) forecast adjusted profit for the current quarter below analysts' estimate as the company's traditional business of switches and routers continues to struggle with sluggish demand.

Shares of the world's largest networking gear maker fell more than 4 percent in extended trading.

Cisco has been beefing up its wireless and security businesses to offset weakness in its traditional switching unit, which is also facing intense competition from companies such as Juniper Networks Inc (NYSE: JNPR) and China's Huawei [HWT.UL].

However, the newer businesses are not growing fast enough to make up for declines in its main networking division.

Revenue from Cisco's switching business fell 7 percent to $3.72 billion in the first quarter ended Oct. 29.

The decline in switching is likely to stretch out over several quarters, Needham Co analyst Alex Henderson said.

Revenue from security business rose 11 percent to $540 million, while wireless unit's revenue fell 2 percent to $632 million.

Cisco said it expected an adjusted profit of 55-57 cents per share for the second quarter, lower than analysts' average estimate of 59 cents, according to Thomson Reuters I/B/E/S.

"President-elect Trump appears to be very business oriented and is very focused on driving the U.S. economy," Chief Executive Chuck Robins said on a conference call.

Donald Trump's surprise victory in the U.S. presidential election moves U.S. companies much closer than they have been in years to winning a big tax break on $2.6 trillion in foreign profits.

Cisco had $71.0 billion in total cash and investments at the end of the first quarter, including $10.4 billion in the United States.

The company, which in August said it would lay off about 5,500 employees from the first quarter, recorded a pretax restructuring charge of $411 million.

Cisco's net profit fell 4.4 percent to $2.32 billion, while revenue fell 2.6 percent to $12.35 billion.

Excluding items, the company earned 61 cents per share.

Analysts on average were expecting adjusted earnings of 59 cents per share on revenue of $12.33 billion.

(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sriraj Kalluvila and Anil D'Silva)



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