Leaner Cisco back on track

Beats the street.

Network equipment maker Cisco Systems has promised further revenue growth after its second quarter results beat estimates, thanks to a restructuring, leading to a dividend increase.

The company, a sector bellwether because of its global scale and diverse client base, forecast 5 to 7 percent growth in fiscal third-quarter revenue.

That translates into a sales outlook of US$11.4 billion to US$11.6 billion, matching or slightly exceeding Wall Street's average forecast of US$11.46 billion.

Executives also forecast gross margins of 61.5 to 62 percent in the fiscal third quarter ending April.

"Broadly speaking, people expected a good quarter. This is probably a little better than expected and the dividend is an added surprise," said Mizuho Securities analyst Joanna Makris.

Revenue rose 10.6 percent from the year-ago quarter to US$11.5 billion. Analysts on average were expecting US$11.23 billion.

Net income grew to US$2.2 billion, or 40 cents per share, from US$1.5 billion, or 27 cents share, a year earlier.

Excluding items, earnings were 47 cents per share, beating the average estimate of 43 cents a share, as compiled by Thomson Reuters I/B/E/S.

Cisco said it plans to pay a quarterly dividend of US$0.08 per common share, up 2 cents from the previous quarter.

"Our operational focus continues to yield positive results - we hit our billion dollar expense reduction a quarter early," Chief Executive John Chambers said in a statement on Wednesday.

Cisco last year scaled back on consumer businesses and laid off thousands in a sweeping  four-month overhaul, aiming to cut expenses by US$1 billion.

Cisco's core business is routers and switches, which direct Internet traffic, but the company has also focused on data centres, enabling and providing cloud computing technology and video platforms.

(Reporting By Nicola Leske in New York; Additional reporting by Alexei Oreskovic in San Francisco; Editing by Richard Chang).