Cisco takes a coronavirus beating as profits fall

Cisco is not having a good pandemic.

While parts of the technology sector are still viewed as a relatively safe haven, the world’s biggest maker of Internet switches and routers has just posted an 8% fall in revenues, to about $12 billion, and a 9% drop in net income, to roughly $2.8 billion, for the April-ending quarter (its fiscal third), compared with the year-earlier period.

Its performance will probably worsen, too. Cisco’s forecast for the current, July-ending quarter is that sales will fall by approximately one tenth. If they do, it would be Cisco’s biggest tumble in more than ten years.

None of it comes as a great surprise. In fact, parts of the analyst community had been expecting a far more disappointing set of figures. Michael Genovese, an analyst at MKM Partners, even described Cisco’s performance as “impressive,” and said the Californian company “blew away” his much lower estimates.

The problem, of course, is Cisco’s heavy exposure to belt-tightening corporate customers and a hardware sector hammered by supply chain disruption. That could certainly have been worse, according to Genovese, but “manufacturing challenges and component constraints” were largely blamed by Kelly Kramer, Cisco’s chief financial officer, for a 15% drop in infrastructure sales, to about $6.4 billion. Because that is Cisco’s biggest division, accounting for more than half of total sales, the decline weighed heavily on the overall business.

“You have industries that are at the heart of this crisis who I wouldn’t expect to make significant investments until we get to the other side,” said CEO Chuck Robbins during a call with analysts, according to a Seeking Alpha transcript.

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