Cisco finds "comfort level" in Huawei war during strong Q4

John Chambers salutes vendor's competitiveness after stellar profit boost to close year

Cisco pleased Wall Street with a healthy boost in profitability during its fourth fiscal quarter, despite relatively modest top-line growth.

For the three months to 28 July, the networking titan grew GAAP sales 4.4 per cent to $11.7bn (£7.5bn). But operating profit soared 62.8 per cent on the corresponding period last year to almost $2.4bn.

Across the full fiscal year, sales rose 6.6 per cent to $46.1bn, with operating profit growing 31.2 per cent to $10.1bn. Cisco chief executive John Chambers claimed his firm delivered a "strong performance" in FY12.

"Our strategy – delivering intelligent networks and technology architectures, built on integrated products, services and software platforms, to fuel our customers' businesses – is proving the right long-term strategy for our success," he added.

Despite the boost in profitability, Cisco's gross product margin stood at 60.4 per cent during Q4, representing a sequential erosion of 1.6 points. But, in a conference call with analysts, Chambers (pictured) denied the decline was indicative of a trend towards more aggressive pricing.

"If you look at where we are going, the pricing on a global basis has not changed... materially in the past one to two quarters," he explained. "We are now learning how to compete very effectively against and [finding] our comfort level in competing not [just] with our traditional players in the marketplace... but taking on Huawei and others.

"On a global basis we do not have normal pricing in any area. Any time you win large deals in emerging markets such as China and India, especially, in service providers, those have tighter gross margins and clearly you saw us win some of those these quarters. So I would not say that it is an unusual pricing environment, you just see certain pressures based upon size, bids and also geographic issues."