http://www.nytimes.com/2014/11/13/technology/cisco-quarterly-earnings.html 2014-11-13 00:32:59 Cisco’s Income Falls, but Quarterly Revenue Sets a Record The once-dominant networking equipment manufacturer is battling more well-funded competitors and technology changes that threaten profits. === Cisco Systems Cisco, based in San Jose, Calif., Per-share income was down just 5.4 percent, partly because Cisco has been buying its own stock, leaving relatively fewer shares on the market. The company said revenue grew 1.3 percent, to $12.2 billion. Still, John T. Chambers, Cisco’s longtime chief executive, said he was pleased with the results, which were a record quarter in terms of revenue. “We are still in a tough environment, but seeing encouraging trends as cities, businesses, governments and schools are becoming more digitized,” Mr. Chambers said in a release accompanying the earnings. “Our solutions continue to drive positive outcomes.” Using nonstandard accounting popular among tech companies, Cisco had earnings of 54 cents a share, up 1.9 percent. That was one penny a share higher than the expectations of Wall Street analysts. They had expected 53 cents a share and revenue of $12.16 billion, according to a survey of analysts by Thomson Reuters. Cisco also announced that Frank Calderoni, the company’s chief financial officer, would retire at the end of the year. Cisco was briefly the world’s most valuable company in market capitalization, riding high in the first Internet bubble. That strong market position enabled it to sell equipment with extremely high profit margins. Since then, despite an explosion in online and mobile activity, Cisco has battled an increasing number of well-funded competitors, technology changes that threaten Cisco’s profits and difficulties entering new markets. Over the quarter, Cisco spent $2 billion on dividends and share buybacks, a considerable amount for a technology company. The company — whose payouts may have been placating shareholders who were tired of a tech stock that has done little for several years — still has $52.1 billion in cash. For several years, Mr. Chambers has tried to increase Cisco’s value by moving from selling equipment to selling higher-value services. These include developing large sensor-rich environments like “smart cities,” capable of better managing things like traffic and water. These ambitions, however, have been crimped by managing Cisco’s day-to-day business. Over the quarter, sales to telecommunications providers, mostly equipment, fell 10 percent. Sales in Asia, a crucial developing market, were down 12 percent. Sales of collaboration and video gear also fell. Equipment for data centers and security gear, both relatively smaller parts of Cisco’s business, were notably stronger. Switching, Cisco’s biggest business, grew just 3 percent. Cisco’s gross margins, at 59.9 percent of sales, were down from 61.3 percent a year ago. That may be a harbinger of new challenges to come: More competitors have networking equipment that combines commodity-type semiconductors with lots of software. The new entrants, including Dell, have no history in the business, which enables them to sell their boxes with lower profit margins.