Cisco Systems Reports Lower Revenue, Profit -- Update

By Dow Jones Business News, 
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By Anna Prior

Cisco Systems Inc. reported year-over-year declines in third-quarter revenue and earnings, but shares rose in after-hours trading as results surpassed its expectations.

The Silicon Valley network-equipment giant, which is seen as a bellwether for corporate technology spending, posted a 12% decline in third-quarter net income and a 5.5% drop in revenue for the fiscal third quarter, both better than the muted forecast the company had issued in February.

Shares, up 1.7% this year, rose 3.9% to $23.71 in recent after-hours trading.

Cisco, which supplies routers and switching gear that funnel traffic on corporate campuses and over the Internet, recently has built up a fast-growing line of servers. But the company signaled last year that it expected business to slow and said it was moving to trim some 4,000 jobs, or 5% of its workforce. Cisco also has warned that it has seen weak demand in China, Brazil, Mexico, India and Russia.

Still, the company recently predicted that a broad technology trend of connecting everyday products to the Internet--which Cisco calls the Internet of Everything--would begin to lift Cisco's business soon.

For the quarter ended April 26, Cisco reported a profit of $2.18 billion, or 42 cents a share, down from $2.48 billion, or 46 cents a share, a year earlier. Excluding stock-based compensation, acquisition-related costs and other items, adjusted per-share profit was flat at 51 cents.

Revenue fell to $11.55 billion from $12.22 billion.

In February, the company projected an adjusted profit of 47 cents to 49 cents a share on a revenue decline of 6% to 8%. The company said then that it faced issues such as a slowdown in orders from emerging economies and "product transition" issues, as customers held up purchases to evaluate new switching and routing equipment.

Product revenue dropped 7.7% in the third quarter to $8.82 billion, while service revenue increased 2.6% to $2.73 billion.

Gross margin narrowed to 60.7% from 61.5%.

Write to Anna Prior at anna.prior@wsj.com

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