Cisco's router, security performance drive up profit to $11.8B, but switch business takes a hit

Cisco saw that growing demand for its routers and network security products were a key factor in driving up its fiscal second quarter revenues to $11.8 billion, but switches remained a weak spot.

Security continued to be a key starter in the company's portfolio, rising 11 percent to $462 million. During the quarter, Cisco added another 2,000 security customers, ending the period with a total of 10,000 security customers.

"Security remains the most critical priority for our customers and as everything connects it makes the network even more relevant," said CEO Chuck Robbins during the earnings call, according to a Seeking Alpha transcript. "As the largest security provider, we have been focused on driving the growth of this business, while at the same time migrating our model from a primarily hardware business to a software and services business."

Driven by sales of its CRS platforms to service providers, routing revenue grew 5 percent to $1.85 billion.

"We saw our routing business grow 5 percent, driven by double-digit growth in our CRS platforms, with particular strength in the mobility and Web-scale service provider segments," said Kelly Kramer, EVP and CFO for Cisco.

However, the company took a hit from its switches division, which dropped 4 percent to $3.48 billion.

Kramer said the decline in switches was due to "macro weakness in our campus business, something that we've observed in the past during volatile times as customers pause spending decisions."

From an overall financial perspective, Cisco's revenue rose 2 percent to $11.8 billion, excluding revenue from the CPE segment it sold to Technicolor.  

Cisco forecast third quarter 2016 adjusted profit of 54-56 cents per share and revenue growth of 1-4 percent. Financial analysts polled by Thomson Reuters I/B/E/S forecast third quarter profit of 55 cents per share and revenue of $12.02 billion.

Shares of Cisco were trading at $24.65, up $2.14, or 9.51 percent, in late Thursday morning trading on the Nasdaq stock exchange.  

For more:
- see the Seeking Alpha transcript
- Reuters has this article

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