Cisco Delivers Strong Second Quarter Earnings

Q2 earnings topped the company's projections but Q3 is expected to come in a little lower. Cisco's UCS platform is growing by leaps and bounds.

By Sean Michael Kerner | Posted Feb 9, 2012
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Cisco Systems (NASDAQ:CSCO) is having a really good start to 2012. The networking giant reported second quarter financial earnings late Wednesday that surpassed their own expectations.

For the second quarter of 2012, Cisco reported revenues of $11.5 billion which is an 11 percent year-over-year increase. The revenue growth exceeded Cisco's own guidance of seven to eight percent given during the first quarter of the year. Net Income was reported at $2.2 billion or $0.40 a share.

Moving forward, Cisco CEO John Chambers provided third quarter fiscal 2012 guidance for revenue growth to be in the range of five to seven percent on a year-over-year basis.

"The bottom line for Cisco is simple: innovation, speed and agility are in. Costs and complexity are out," Chambers said during the company's earnings call.

Cisco has been in the proccess of restructuring its business over the last year. At Cisco's 2011 Financial Analyst meeting Chambers' told the audience that his company was "fat" and needed to realign its priorities.

For Cisco, the first foundational priority is their leadership in core networking, which is all about routing and switching and services. During the second quarter, Cisco's next generation routing portfolio grew revenues by eight percent.

"We appear to again be gaining market share in routing versus many of our competitors," Chambers said. "For example, in the most recent quarter, one of our major routing competitors reported routing product revenue being down over 20 percent year-over-year."

Cisco's rival, Juniper Networks reported their fourth quarter fiscal 2011 earnings at the end of January showing a revenue decline. Juniper attributed their revenue decline to a reduction in service provider spending on high-end routers.

Cisco has also taken on rivals in the data center with their UCS server platform. During the quarter Cisco hit a major milestone for the platform announcing that they had over 10,000 customers. UCS was first revealed in March of 2009. Chambers noted during that time the data center has evolved from bare metal to virtualization to the cloud.

"The results in this area have been particularly outstanding given that we are taking on big competitors in the data center," Chamber said. "As we focus on the market transition with the convergence of server, networking and storage in the cloud, our UCS product grew year-over-year at 91 percent in terms of revenue."

Overall, Chambers stressed that he was proud of what they have accomplished over the last year.

"For example, last year, we simultaneously refreshed practically our entire switching portfolio, which is the largest ever product portfolio refresh in such a short period of time," Chambers said. "This significantly drove down price performance to the benefit of our customers, and today, our shareholders see the benefits of that in our reported numbers, both from a revenue and a gross profit perspective."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of the IT Business Edge Network, the network for technology professionals. Follow him on Twitter @TechJournalist.

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