When are flat revenues not so bad? When your name is Cisco

Switchzilla manages to squeak past analyst estimates in Q3

Cisco says that it is optimistic on its financial outlook despite a "challenging environment" that saw the networking giant's quarterly revenues drop slightly.

"We delivered a strong Q3, executing well despite the challenging environment," said CEO Chuck Robbins.

"I'm pleased with our performance today as well as the progress we're making in transitioning our business to a more software and subscription focus, which we'll continue to apply across our entire portfolio."

For the fiscal Q3, ending April 30, Cisco reported:

• Revenues of $12bn, down 1 per cent from $12.1bn in Q3 2015.
• Net income of $2.3bn, down 4 per cent from $2.4bn in the year-ago quarter.
• Non-GAAP earnings per share of $0.57 came out just ahead of analyst estimates of $0.55.
• Switching hardware revenue of $3.45bn was down 3 per cent year over year, while NGN Routing revenue of $1.89bn saw a 5 per cent decrease.
• Video revenues of $468m were up 18 per cent, and security revenues of $482m showed a 17 per cent increase on the year-ago quarter.

The numbers reflect an ongoing effort within Cisco to shift its focus away from its core networking hardware business and more towards hosted services, including security and virtual appliance management. Switchzilla made a point of noting those shifts in its quarterly report, said that services revenues in both the quarter and the nine month period are up over the year-ago period.

Don't expect revenues to pick up in the short term, however. Cisco's guidance for the upcoming Q4 period estimates that revenues will increase 0-3 per cent and non-GAAP earnings per share will be $0.59-$0.61.

Cisco's share price was slightly up, increasing 0.26 per cent to $26.72 per share in after-hours trading. ®