Cisco shrugs off Q2 profit drop

Giant networking vendor sees turnover rise six per cent and claims it is in a position of competitive advantage

Cisco’s net profit dropped nearly 18 per cent for its second fiscal quarter of 2011, despite a six per cent rise in turnover.

The networking behemoth shrugged off the drop in profit for the three months to 31 January 2011, pointing to the fact that its overall financial strength and cash position gives it a competitive advantage.

For the quarter, total revenue stood at $10.4bn (£6.5bn), compared with Q2 2010 revenue of $9.8bn. Net profit stood at $1.5bn, a 17.9 per cent drop on the $1.9bn hit in Q2 2010.

New products accounted for 31 per cent of total turnover, switches for 30 per cent, services 21 per cent, routers 16 per cent and "other" two per cent. Growth-wise, new products enjoyed a 15 per cent revenue growth, with datacentre up 59 per cent, collaboration up 37 per cent and wireless up 34 per cent year on year.

Europe saw the smallest overall growth at just two per cent, with the US and Canada seeing seven per cent growth. Emerging markets grew 27 per cent in the quarter, with Asia-Pacific showing eight per cent growth.

John Chambers, chief executive of Cisco, said: “The quarter played out as we expected. Our strategy of tightly integrating our multiple products through an architectural approach is working, and we are delivering innovation in each major product family.

“As a company, we are going through a period of transition as we move aggressively in the market with our architectural strategy. We have managed these market transitions many times, positioning Cisco and our customers for success. Simply put, we are owning our evolution and the next generation of industry leadership,” he added.