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Cisco Forecast Aided by Pandemic-Fueled Online Traffic Surge

“Anyone who’s going to be in trouble three to six months from now is already pausing.”

Ian King (Bloomberg) -- Cisco Systems Inc. gave a better-than-feared sales forecast, helped by a boom in remote work and online activity that is stoking demand for the company’s network equipment.

Revenue in the fiscal fourth quarter, which ends in July, will fall 8.5% to 11.5% from a year earlier, the San Jose, California-based company said Wednesday in a statement. At the mid point. that indicates revenue of about $12 billion, slightly more than analysts expected. Adjusted profit will be 72 cents to 74 cents a share, also ahead of analysts’ projections, according to data compiled by Bloomberg.

“The pandemic has driven organizations across the globe to digitize their operations and support remote workforces at a faster speed and greater scale than ever before,” Chuck Robbins, chief executive officer of Cisco, said. The shares rose 2.8% in extended trading, after closing at $41.95 in New York.

Spending on data centers, servers and other equipment has increased to support millions of employees working from home over the internet. As the largest provider of switches and other gear for computer networks, Cisco benefits from this trend. The company has also touted a surge in use of its Webex video conferencing service. However, a recession has begun, limiting technology spending by companies and governments.

During a conference call, Robbins was asked whether orders will decline again if the economy slows further. The CEO said he thinks that’s already happened. Some industries like travel and leisure are not spending, while elsewhere the crisis has spurred investment to update network infrastructure, he added.

“Anyone who’s going to be in trouble three to six months from now is already pausing,” Robbins told analysts.

Cisco said net income in the fiscal third quarter fell to $2.8 billion, or 65 cents a share, from $3 billion, or 69 cents, a year earlier. Revenue fell 8% to $12 billion, matching Wall Street estimates. Excluding certain items, Cisco posted profit of 79 cents a share, beating analysts’ expectations.

Cisco’s hardware business reported revenue of $6.43 billion, down 15% from a year earlier. Applications, its software unit, saw sales fall 5% to $1.36 billion, while security revenue rose 6% to $776 million.

In mid-April, Cisco said it would offer $2.5 billion in financing to customers to encourage them to keep buying equipment during the Covid-19 pandemic. Some buyers of Cisco gear, services and software will be given a 90-day holiday on payments, and can defer 95% of the cost of what they purchase until January 2021. All Cisco products are eligible for the program.

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