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Cisco’s software push fuels quarterly beat, strong forecast

(Reuters) – Cisco Systems Inc (CSCO.O) topped Wall Street targets for quarterly revenue and profit and forecast first-quarter sales above estimates on Wednesday, as the network gear maker’s transition to a software-focused company gains traction.

FILE PHOTO: A Cisco Systems sign is seen outside a Cisco health clinic at Cisco Systems in San Jose, California, U.S., March 22, 2018. REUTERS/Elijah Nouvelage/File Photo

Shares rose 6.1 percent to $46.53 in extended trading as the company also highlighted improving subscription-based revenue.

Cisco, like other legacy technology companies, has been launching new products focused on high-growth areas such as cyber security and Internet of Things to cushion sluggish demand in its traditional routers and switches business.

“We’re seeing the returns on the investments we are making in innovation and driving the shift to more software and subscriptions,” Chief Financial Officer Kelly Kramer told analysts on a post-earnings call.

The company forecast first-quarter revenue growth of between 5 percent and 7 percent, implying $12.86 billion at the mid-point, and adjusted profit of between 70 cents and 72 cents per share.

Analysts were expecting a profit of 69 cents and revenue of $12.61 billion, according to Thomson Reuters I/B/E/S.

Subscriptions, which provide a more steady revenue stream, represented 56 percent of total software revenue in the reported quarter, the company said.

Revenue in the security business, which offers firewall protection and breach detection systems, rose 12 percent to $627 million, beating estimates of $615.8 million. Deferred revenue in the business jumped 23 percent.

Cisco said in August it would buy cyber security provider Duo Security for $2.35 billion, the latest in a series of acquisitions by Chief Executive Officer Chuck Robbins as he builds out the company’s newer businesses.

CFO Kramer told Reuters Cisco is looking at more acquisitions in the security space.

Revenue in its infrastructure platform division, which houses the company’s traditional business of supplying switches and routers, rose 7 percent to $7.44 billion. Analysts had expected revenue of $7.32 billion.

On an adjusted basis, the company earned 70 cents per share, beating analysts expectation by 1 cent.

Total revenue rose 6 percent to $12.84 billion, topping average estimate of $12.77 billion.

Reporting by Munsif Vengattil in Bengaluru; Editing by Sriraj Kalluvila

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