Cisco enjoyed a long reign as the king of routers and switches. But as Internet networking evolves, Cisco has worked to reinvent itself — and its shift into services like online video and data is paying off.
The tech bellwether announced Wednesday that it earned $2.7 billion on $12.1 billion in sales for the second fiscal quarter. Both up single-digit percentages over the year. Both figures beat analysts’ expectations. Cisco shares lost about 2% in after-hours trading.
Cisco also continued to grow its impressive cash hoard, which now sits at $46.4 billion.
Cisco’s core switching and routing businesses make up roughly half the company’s revenue. But those sectors are declining, and the real story is in Cisco’s strategic services. Those divisions, which include data centers and online video services, are a smaller part of Cisco’s overall business, but they’re growing at a rapid clip.
That has helped Cisco, whose stock is trading right around its 52-week high, fare significantly better than its main rivals.
The CEO of troubled Alcatel-Lucent announced last week that he’ll step down. Shares of F5 Networks also fell drastically in the first half of 2012 but have clawed back a bit. Another Cisco rival, Juniper Networks, beat Wall Street estimates last month but issued a cautious outlook for the current quarter.
It’s not only techies who pay attention to Cisco. Cisco’s massive, global reach makes it something of an indicator for the world’s economy.
The company famously has its fingers in all parts of the networking pie, with a wide array of business sectors both home and abroad. If businesses and governments are worried about the economy, they won’t be spending money on networking equipment.
CEO John Chambers talks often about how Cisco’s reach allows the company to spot global trends as they begin. Last quarter, Chambers said the U.S. economy was improving slowly, although it’s too early to call a trend. He also said he expects the economic situation in Europe to get worse before it gets better.
