As technology becomes more central to businesses’ strategies, companies invest in new products even during market volatility, Cisco’s CEO told CNBC on Thursday.
Cisco Systems stock was up more than 9 percent midday Thursday after the company reported better-than-expected quarterly profit late Wednesday, helped by higher demand for its routers and security products. It also added $15 billion to its share buyback program.
Cisco posted fiscal second-quarter earnings of 57 cents per share on $11.8 billion in revenue. Analysts had expected the networking equipment giant to report earnings per share of 54 cents a share on $11.75 billion in revenue, according to a consensus estimate from Thomson Reuters.
Though stock markets have been skittish on China’s economy, Cisco’s chief executive, Chuck Robbins, told “Squawk on the Street” on Thursday that China and India were two bright spots for the company.
“Recently, we’ve experienced one of the most volatile times in the global markets. This volatility led to a slowdown in spending impacting our business, especially during the last few weeks of January as we closed our quarter. Despite this slowdown, we executed very well,” said Robbins on the company’s earnings call Wednesday.
Net income rose to $3.1 billion, or 62 cents per share, from $2.4 billion, or 46 cents per share, a year earlier.
Cisco is shifting to high-end switches and routers and investing in new products such as data analytics software and cloud-based tools for data centers.
Revenue in the company’s routers business rose 5 percent to $1.85 billion in the quarter, which ended Jan. 23, Cisco said. Revenue in the switches business, the company’s biggest, fell 4 percent to $3.48 billion.
Its security business, which offers firewall protection as well as intrusion detection and prevention systems, recorded an 11 percent rise in revenue to $462 million.
Cisco boosted its current share buyback plan of $97 billion, of which $16.9 billion was remaining, by $15 billion.
“We are very confident in the strength of our business and future cash flows allowing the substantial increase of our dividend this quarter to 26 cents. We remain committed to our shareholders in delivering profitable growth and returning a minimum of 50 percent of our free cash flow back annually,” said Kelly Kramer, Cisco executive vice president and chief financial officer, in a statement.
Cisco’s earnings come only a week after the company announced that it would buy Jasper Technologies for $1.4 billion in cash in a move to help its customers connect, automate and manage billions of Internet-connected devices ranging from cars to jet engines to implanted pacemakers.
The company said that privately held Jasper had developed the industry’s leading platform for what’s known as the “Internet of Things” (IoT), encompassing a growing range of connected devices, appliances and machines.
“The area that we’re really focused on is this next-generation build-out, which is going to enable the applications that are going to power mobile, power cloud and power IoT,” Robbins told CNBC.
Cisco says it plans to add new Internet of Things services including enterprise Wi-Fi, security for connected devices and advanced analytics to better manage device usage.
It comes as Cisco’s customers have changed the way they think about technology, bringing more high-level executives from across departments in their companies to meet with Cisco’s briefing staff.
“Our customers are fundamentally changing in how they think about technology,” Robbins told CNBC on Thursday. “The statistic that’s really telling is that 70 percent of the attendees … are not from the IT department of the organization. I think that speaks to the fact that technology now is not only viewed at something that’s being bought in times of prosperity, but they also view it as a fundamental element of their strategy going forward.”