After a year of streamlining and job cuts, Cisco is showing solid gains as illustrated by its latest financial quarter, which beat analyst estimates.
Cisco Systems has spent much of the
past year undergoing a gut-wrenching reorganization that has included shedding
business units and more than 8,000 jobs
in an effort to streamline
the company after several quarters of difficult financial results.
In announcing the networking giant's
fiscal year 2012 first-quarter financial numbers Nov. 9, Cisco CEO John
Chambers said the bulk of the reorganization is completed, and now the company
is putting its focus on expanding its presence in areas that executives have
identified as growth markets, including the data center, cloud computing,
collaboration, video, and core switches and routers.
In addition, Cisco (NASDAQ: CSCO) is
pursuing the long-term growth objectives outlined to financial analysts in
September of revenue increases of between 5 and 7 percent over the next three
For the first quarter, Cisco exceeded
analyst estimates, with revenue growing 5 percent over the same period last
year to $11.3 billion. At the same time, net income fell to $1.8 billion, an 8
percent drop. Chambers said Cisco is forecasting revenue increases of 7 to 8
percent in the next quarter.
Cisco spent much of 2010 and into 2011
dogged by disappointing financial results and lowered forecasts. Analysts
questioned whether Cisco's expansion into new business sectors caused the
company to lose focus on its core businesses, particularly switches and
routers, enabling rivals like Hewlett-Packard-bolstered by its acquisition of
3Com-and Juniper Networks to make inroads in the networking space.
The situation prompted Chambers to
issue a lengthy memo to employees about changes that were in the offing to get
the company back on its feet. Soon after, Cisco shut down the bulk of its
consumer business, including shuttering its profitable Flip video camera unit,
and later streamlined its sales, services and management units.
In May, Chambers warned that more
streamlining was needed, which would include job cuts, in an effort to save $1
billion in expenses. Those cuts were announced in July.
Chambers said during a conference call
with analysts and journalists Nov. 9 that the company is stabilizing and is
seeing growth in many of its business units and in many regions around the
world. For example, the company's data center business saw 107 percent revenue
growth, due in large part to growth in its Unified Computing System (UCS), a
converged data center appliance that offers not only Cisco server and
networking technology, but also storage from EMC and virtualization from
Cisco added 1,572 new UCS customers in
the quarter, bringing the total number of UCS customers to almost 9,000.
Like other top-tier tech vendors such
as IBM, Dell and HP, Cisco is looking to grow beyond being a company that
simply sells individual products and into one that sells complete enterprise
solutions, from data center offerings to collaboration and video products, and
offers the services to bring all that together.
Chambers said Cisco saw product orders
grow between 12 percent and 13 percent in all regions throughout the world.
However, he also warned that going forward, the shaky economic situations in
Europe and elsewhere, as well as the flooding issues in Thailand, will continue
to be points of concern for Cisco and others.
"Europe will be a challenge for us
in the next quarter, as it will be for others," Chambers said.