Cisco shocks Wall Street with adjusted profit

the Cisco kidCisco 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.

The networking giant has been trying to improve its wireless and security businesses to offset weakness in its switching unit. This section used to be its bread and butter but is facing intense competition from companies such as Juniper and China’s Huawei.

It looks like the newer moves 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.

The company had $71 billion in total cash and investments at the end of the first quarter, including $10.4 billion in the United States.

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

Wall Street was expecting adjusted earnings of 59 cents per share on revenue of $12.33 billion.