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Cisco profits slump after Trump tax bill

Networking giant posted $8.8bn loss in the second quarter of its fiscal 2018 after booking charges related to the US government’s Tax Cuts and Jobs Act, but saw a strong quarter elsewhere

Networking sector kingpin Cisco suffered a net loss of $8.8bn (£6.25bn) in the second quarter of its fiscal 2018, failing to translate solid growth in revenues to its bottom line after being hit by numerous charges – including an $11.1bn charge related to the enactment of president Trump’s Tax Cuts and Jobs Act, which became law on 22 December 2017.

Cisco said it was pleased with the overall tax rate reduction resulting from the new legislation, but because its financial year will not end until July 2018, it will not realise the full benefit until well into its fiscal 2019. Without the impact of the charges, the company’s profits actually grew by 10% year on year to $3.1bn.

Meanwhile, the increasing criticality of networking technology to wider digital transformation initiatives such as multiple cloud adoption and the internet of things (IoT), as well as widespread spending to shore up network defences in the face of exponential growth in cyber security threats, meant the underlying quarter had actually been quite strong, with total sales up 3% to $11.9bn.

“We had a great quarter,” CEO Chuck Robbins told analysts on a quarterly conference call, transcribed by Seeking Alpha. “We returned to revenue growth. We continued to drive momentum in our intent-based networking [IBN] portfolio and saw strength across the business. We made continued progress in shifting more of our business towards software and subscriptions.”

Robbins said Cisco’s IBN line – which uses machine learning techniques to automate network administration tasks – was now the fastest-ramping new product in the supplier’s history, with more than 3,100 customers adopting the platform since it was unveiled last summer. Total product revenues across Cisco were up as a result, with solid growth also seen in datacentre switching and wireless.

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“I am very pleased with the traction we’re seeing in our business, the progress we’re making against our strategy, and I’m very optimistic about our future,” said Robbins.

“I’d also like to say how incredibly proud I am of Cisco’s leadership in environmental. Our recent recognition by Barron’s as the number one most sustainable company in the US underscores our deep commitment to enable a better world in which everyone has the opportunity to thrive.”

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