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(Reuters) – Cisco Systems Inc beat analysts’ estimates for quarterly revenue and profit on Wednesday, as the network gear maker benefited from demand for its routers and switches and growth in its newer focus areas such as software.
FILE PHOTO: A logo of Cisco is seen during the Mobile World Congress in Barcelona, Spain February 27, 2018. REUTERS/Yves Herman/File Photo
Shares of the company, which also forecast second-quarter revenue largely above expectations, rose 4 percent in extended trading, putting them on track to add to the nearly 16 percent gain for the year.
Cisco pivoted to software and cyber security to cushion the impact from slowing demand for its routers and switches from companies increasingly shifting to cloud services offered by Amazon.com Inc, Microsoft Corp and Alphabet Inc instead of building their own networks.
Revenue in its application software businesses rose 18 percent to $ 1.42 billion, beating analysts’ average estimate of $ 1.37 billion, according to IBES data from Refinitiv.
Sales in its security business, which offers firewall protection and breach detection systems, rose 11 percent to $ 651 million. That fell short of IBES estimate of $ 656.4 million, but beat research firm FactSet’s estimate of $ 648.1 million.
Deals such as the $ 2.35 billion purchase of cyber security provider Duo Security in August have played an important part in driving growth in Cisco’s newer business.
Acquisitions provided an 80 basis point boost to the company’s first-quarter results year-over-year, Chief Financial Officer Kelly Kramer said on a post-earnings call with analysts.
Revenue in its infrastructure platform unit, which houses the switches and routers business, rose about 9 percent to $ 7.64 billion, topping expectation of $ 7.39 billion.
Subscriptions, which provide a more steady revenue flow, accounted for 57 percent of total software revenue in the first quarter, the company said. The share was 56 percent in the preceding quarter.
“Cisco is executing on its plan to move its business model to software and subscriptions while benefiting from a strong IT spending environment,” said Mark Cash, an analyst with Morningstar.
Cisco said tariffs were immaterial for the reported quarter, but added that the impending 25 percent duties could weigh on third-quarter results.
The company said it expects second-quarter revenue growth of between 5 percent and 7 percent from a year earlier. This implies a range of between $ 12.48 billion and $ 12.72 billion, while analysts were expecting $ 12.53 billion.
For its first quarter ended Oct. 27, the company reported an adjusted profit of 75 cents per share, above the average estimate of 72 cents.
Total revenue rose 7.7 percent to $ 13.07 billion, topping estimate of $ 12.87 billion. However, the company said deferred revenue fell 9.4 percent to $ 16.81 billion.
Reporting by Akanksha Rana in Bengaluru; Editing by Sriraj Kalluvila
ST PETERSBURG (Reuters) – Russia has overtaken France as the biggest market for French ride-sharing startup BlaBlaCar, a growth driven by long distances between Russian cities and a culture of giving lifts to strangers, the company’s co-founder and CEO told Reuters.
Nicolas Brusson said the unlisted company, which entered the Russian market four years ago, plans to invest 10 million euros in Russia next year, more than BlaBlaCar’s total investments over the past three to four years.
“We are talking about 15 million members in Russian which means that more than one Russian of ten is already signed in BlaBlaCar. We are speaking about over 3 million Russians that are transported by BlaBlaCar every month,” he said.
BlaBlaCar’s app works by matching passengers with drivers who have spare space in their vehicle and are heading to the same destination.
The company, founded in Paris in 2006, describes itself as the world’s largest carpooling community. It has two models of making money in Europe, taking a service fee from passengers for every journey or allowing the use of its app under subscription.
Brusson said the first reason for the firm’s success in Russia was cultural.
He said it had to work hard in Europe to persuade customers BlaBlaCar was a safe service. “In Russia people are more used to sharing and got the features of the service faster,” he said.
Before ride-sharing services like Uber came to Russia, it was normal for citizens to flag down a private car in the street, and share the ride, for a modest fee. The practice grew out of the fact that car ownership was not widespread, while taxis were heavily regulated and expensive.
Brusson said the second reason BlaBlaCar did well in Russia “is the size of the country, the shape of the country. It’s a kind of perfect for long distance cooperation because of big population, lots of big cities we can help connect.”
Russian economic growth is slowly recovering after two years of recession, but is also under pressure from U.S. sanctions imposed in April on Russian businessmen and big companies.
Brusson said those factors might play to BlaBlaCar’s strengths. “People are going to be more cost-conscious so people will choose services like ours because people can save money and drive cheaper,” he said.
BlaBlaCar is ramping up investment in the Russian market even though its operations in Russia, unlike in European Union markets, are not yet monetized, passengers in Russia pay for their journeys in cash directly to drivers not to the service.
Brusson saw Russia as a very strong financial contributor for BlaBlaCar in terms of four to five years.
“Next year we will invest as much as we’ve done in the last 3-4 years. Because the activity is just doubling year on year, and there is a real need we can help address, so it leads us to invest,” he said.
Reporting by Polina Nikolskaya; Editing by David Evans
PARIS (Reuters) – When Rob Spiro left San Francisco to settle in France with his wife and kid in 2016, the family chose a mid-sized city on France’s west coast over Paris’ burgeoning start-up scene.
At 32, the Yale-educated entrepreneur and former Google product manager had already co-founded two start-ups, including one sold to Google for $ 50 million in 2010.
In Nantes, France’s sixth largest city, known for its mediaeval castle and whimsical mechanical creatures, he sees the potential for a smaller version of America’s Silicon Valley, home to tech giants Apple, Facebook and Google.
Quality of life, not money, is the key, he says.
“What everybody in Nantes sees and experiences is that there are thousands of people who move here from Paris,” he said at his start-up accelerator, Imagination Machine.
“They’re looking for a better quality of life, but they want to remain in a city that is active and dynamic.”
His “incubator”, financially backed by the region’s biggest companies, opened its doors in June to support the launch of selected start-ups with seed funding and mentoring.
Nantes itself is part of the promotional picture. The city was ranked second after Bordeaux among cities where Parisian executives would wish to move, according to an August poll for recruiting website Cadremploi.fr.
“Here’s the strategy to become the next Silicon Valley: become a place where people, especially young people, want to live,” Spiro said.
With venture capital investments reaching new records in Europe, the competition to lure new tech companies goes beyond the three usual metropolises – London, Paris, Berlin – and now includes smaller cities that bet on their own mix of schools, research centers, investors and culture to lure hotshots.
Venture capital firms invested 8.7 billion euros ($ 10.3 billion) in European tech companies in the first half of 2017, up 21 percent from the year before, according to Dealroom. Such investments jumped 18 percent to 1.3 billion over the same period in France, putting it third after Britain and Germany.
The trend is now gaining further momentum, driven by high expectations for business-friendly policies under new President Emmanuel Macron and the uncertainties caused by the British vote to leave the European Union.
Nantes-based iAdvize has benefited from the boom. The company, which offers a marketing platform connecting customers to experts, closed a 32-million-euro fundraising in October.
It is one of the prime examples of Nantes’ success in the tech field, along with Akeneo, which makes software for retailers, and Lengow, which does the same for e-commerce sites.
French venture capital fund Alven has shares in all three.
Part of Spiro’s plan for boosting Nantes’ profile is inviting former U.S. colleagues to come and check it out. Julian Nachtigal, who worked as head of Spiro’s second start-up, signed up for the “French tech visa” available since January.
“I never imagined it would be so easy to get a four-year residential visa to the EU,” Nachtigal said, comparing Europe favorably to the U.S. approach under President Donald Trump.
“There’s a growing trend of people leaving Silicon Valley to live elsewhere,” he added, citing the high cost of living.
Within France, too, a similar trend can be seen. Gregoire Monconduit, co-founder of Atelier Rosemood, an online maker of personalized birth announcements and wedding invitations, chose to move to Nantes years ago from Paris.
“We hesitated between three cities: Lyon, Aix and Nantes,” he said. “We thought we’d be out of Paris for three years, it’s been six years already and it’s the best decision we made.”
A long road lies ahead, however, if Nantes is to catch up with Paris, where a 34,000-square-metre megacampus for start-ups, called Station F, opened in June.
The Parisian region drew three quarters of all venture capital investments in the first half of this year, according to accounting firm EY. The region that includes Nantes got less than 3 percent of the total.
Editing by Luke Baker and Gareth Jones
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