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Cisco defies market shift to cloud with rising hardware sales

Software and security bets also pay off as revenues exceed analyst expectations

Cisco has said increased demand for its router hardware as well as a surging software business has led to an unexpected jump in year over year revenue and profits, according to a earnings report released on Wednesday.

Demand for its hardware had been declining as customers frequently turned towards cloud services provided by the likes of Amazon and Microsoft. However, revenue for its hardware unit rose 9% to $7.64 billion, beating analyst expectations of $7.39 billion, according to Reuters.

The company recently immersed itself in the software and cyber security market following a decreased demand for its hardware, resulting in the $2.35 billion acquisition of cyber security provider Duo Security back in August. Wednesday's report showed revenue for its application software business had risen 18% to $1.42 billion for the year, while security sales, which include its firewall protection and breach detection services, were up 11% to $651 million.

"We had a strong start to fiscal 2019 and we believe our opportunity has never been greater," said Chuck Robbins, chairman and CEO of Cisco.

"Our customers are looking to Cisco as a trusted partner to help them operate in a multi-cloud world and to transform their businesses. Our strategy is working and we are well positioned with our growing and differentiated portfolio across multiple domains to bring our customers a more secure, automated and simple IT infrastructure."

The company's shares which forecast unexpected growth in revenue, were also up 4% in extended trading, contributing to a near 16% gain for the year.

Cisco revealed that subscriptions were running steady, providing consistent revenue flow with 57% of total software revenue in the first quarter, following the previous quarter's 56%.

"We executed well, with broad-based growth across all of our geographies, product categories and customer segments, and delivered 8% revenue growth and 23% non-GAAP EPS growth," said Kelly Kramer, CFO of Cisco. "We are seeing the returns on our investments in innovation as we continue to transform our business model."

This welcome news follows its big announcement at its recent 2018 Partner Summit in Las Vegas. Cisco will be offering a range of its security products across its SD-WAN management portal by the end of the year. This includes new firewall services, an intrusion protection system (IPS), URL filtering and its cloud-based security from Cisco Umbrella.

The company said it was responding to the biggest market shift in networking for the past 20 years.

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