July 10, 2020

Cisco Rides Technology Trends to 14.5% Increase in Profit

The world’s largest maker of networking gear has stumbled in recent years as companies bought less and new competitors arose. In response, Cisco moved into technologies like online video, cloud computing and delivery of high-speed Internet over wireless networks.

Those investments appear to be paying off. On Wednesday, Cisco said its sales of switches and routers were basically flat in its third fiscal quarter, which ended April 27. Sales of equipment for big cloud-computing data centers, video and wireless systems, however, were substantially higher.

“This is where the action is,” said John Chambers, Cisco’s chief executive, in an interview after the earnings announcement. “We bet on some of these seven years ago, now they’re paying off.”

Mr. Chambers wants Cisco to diversify into building sophisticated networked systems with many parts. That could prompt growth of its main switching and routing businesses, because it would mean even more Internet traffic from sensors, consumer devices, and industrial products to and from the Internet.

Cisco needs something to revive those businesses, which still make up nearly half of its revenue. Sales of switching gear, Cisco’s biggest sector, fell 2 percent compared with a year ago, while router sales were flat. Video equipment sales grew 30 percent, wireless equipment rose 27 percent and data center gear was up 77 percent, but their total revenue was about half that of switches and routers.

Over all, Cisco’s net income rose 14.5 percent compared with a year earlier, to $2.5 billion, or 46 cents a share. Revenue was up 5.4 percent, to $12.2 billion. By the nonstandard accounting measures popular with many tech companies, Cisco had net income of 51 cents a share, up 6.3 percent from a year earlier. Wall Street analysts, based on a survey by Thomson Reuters, had projected net income of 49 cents a share and revenue of $12.18 billion.

“The new products got them out of what looked like a tough quarter,” said Eric Suppinger, an analyst with JMP Securities in San Francisco.

Results for Cisco, which is based in San Jose, Calif., are often taken as a barometer of overall business spending. Sales in North America rose 10.4 percent, to $7.1 billion, and Mr. Chambers described the business environment as “slow but steady.” Sales in Europe were lower, he said, primarily because of weakness in countries like Spain. “You’re beginning to see Europe bottom out, with the exception of the south,” he said.

Cisco shares were up more than 8 percent in after-hours trading, after closing down 0.28 percent at $21.21.

Article source: http://www.nytimes.com/2013/05/16/technology/cisco-profit-rises-14-5.html?partner=rss&emc=rss

Walgreen Says It Will Split With Express Scripts

NEW YORK (AP) — Walgreen Co. said Tuesday it will end a $5.3-billion-per-year relationship with Express Scripts Inc., saying Express Scripts was not paying it enough money to fill prescriptions and was trying to dictate terms of their partnership.

The announcement follows a similar contract fight a year ago with CVS Caremark Corp. that was eventually resolved.

The disclosure of the impasse with Express Scripts Inc. overshadowed news that Walgreen’s profit climbed 30 percent in its third fiscal quarter.

Walgreen shares fell $2.66, or 5.9 percent, to $42.52 in morning trading. Express Scripts fell 53 cents to $54.26.

Walgreen, the biggest drugstore chain in the U.S., said contract negotiations with Express Scripts have failed, and it will stop participating in the pharmacy benefits manager’s prescription plans starting Jan. 1.

Pharmacy benefits managers like Express Scripts pay Walgreen to fill prescriptions. Walgreen said the St. Louis company wanted to cut those payments so they were less than the published cost of providing the prescriptions. Walgreen said Express Scripts’ payments were already low, and it said the new rates would have been “unacceptable.”

It said Express Scripts will process about 90 million prescriptions that will be filled at Walgreen stores in fiscal 2011, which will bring Walgreen about $5.3 billion in revenue. That’s about 7 percent of the company’s total annual revenue.

Walgreen said Express Scripts also wanted to unilaterally define contract terms including definitions of name-brand and generic drugs, and transfer of prescription drug plans to different networks. It said those terms would have made its business unpredictable. Walgreen said the combination of low rates and unpredictable results would have been worse than the loss of $5.3 billion in annual revenue.

Express Scripts said it has been preparing for Walgreen’s departure. It said more than 50,000 other pharmacies participate in its network. About 20 percent of all U.S. prescriptions are filled at a Walgreen location, and the company has filled 617 million prescriptions in the first three quarters of the fiscal year.

The struggle comes almost exactly a year after a similar struggle between Walgreen and CVS Caremark. In June 2010, Walgreen said it wanted to transition out of CVS Caremark’s network by the start of 2011. Walgreen wanted Caremark to pay it more for filling prescriptions, and it wanted Caremark to drop policies encouraging members to fill prescriptions at CVS’s stores. CVS Caremark had said it would end the relationship in July.

A breakup with CVS Caremark would have cost Walgreen about $4.5 billion in annual revenue. But within about a week, the companies agreed to a multi-year deal. They did not disclose terms.

Deerfield, Ill.-based Walgreen also reported it net income grew to $603 million, or 65 cents per share, during the three months ended May 31. That’s up from $463 million, or 47 cents a share, a year ago when its results were weighed down by costs associated with the health care reform law, its acquisition of the Duane Reade chain, and restructuring costs.

Walgreen said its third-quarter results included a penny per share in restructuring costs. The company had a total of 7,715 stores as of May 31.

FactSet says analysts expected earnings of 62 cents per share.

Revenue climbed to $18.37 billion from $17.2 billion.

Article source: http://feeds.nytimes.com/click.phdo?i=c79ced1b7915d0c5e259f4d71afa7c99