Cisco’s Upbeat Forecast Signals Strong Corporate Spending

Ian King (Bloomberg) -- Cisco Systems Inc. gave a bullish sales and profit forecast for the current period, a sign that corporations continue to spend on their computer networks despite concern that a trade dispute between China and the U.S. will slow global economic growth.

Sales in the fiscal fourth quarter will increase 4.5% to 6.5% from the same period a year earlier, the San Jose, California-based company said Wednesday in a statement. That indicates revenue of as much as $13.5 billion, compared with analysts’ average estimate of $13.29 billion. Adjusted profit will be 80 to 82 cents a share, in line with projections for 81 cents.

Cisco, whose equipment makes up the backbone of the internet and corporate networks, has returned to growth by revamping existing products and adding new software and services under a corporate makeover by Chief Executive Officer Chuck Robbins. The company’s forecast may help defuse concerns that companies are becoming less willing to invest in new hardware amid fears about tariffs on trade between the world’s two largest economies.

Cisco’s outlook takes into account the possibility that the U.S. will follow up on its threat to levy a 25% tariff on a variety of goods made in China, Robbins said.

“We’re proud of what the teams have achieved in a very complex world, but it will remain a complex world,” the CEO said in telephone interview. The company has experience in moving its manufacturing locations and has done the work needed to mitigate the impact of a tariff hike, he said.

Cisco said orders are increasing, particularly from security unit customers, because of the work done over the last two years to revamp its products. That has made the offerings a better fit for the more complicated networking and computing needs of corporations, which are using a mix of in-house networks and outsourcing, Robbins said.