Cisco (CSCO, Financial) cheered the Street with its latest results that came above analysts' expectations. The company reported year over year growth in its revenue while profit was marginally down. As a result of this strong performance, the stock touched its 52 week high. The company bagged some strong orders during the quarter that helped to improve its top line. Although the management cites a tough business environment, it expresses hope on the back of high digitalization seen in businesses, governments and schools.
Changing the strategy
With this in mind, Cisco shifted its business model from selling boxes and standalone services to selling architectures and solutions that drive business outcomes. And it received a good response from companies such as General Motors, along with a huge success in cities like Barcelona and Chicago that evolved into smart cities. Cisco is quite positive about its prospects in this direction and continues to enhance its capabilities.
The company has made some considerable product enhancements that will provide it an edge in the days to come. In routing its Network convergence system (NCS) platform converges IP and optical networking with virtualization. In fact, Cisco prides as the only player with the assets to drive to convergence for its customers. Moreover, its new launches such as the NCS 6000 and CRS-X have reported strong momentum that could continue in the days to come. Going forward, these innovations and new additions will be a significant growth driver for both its top and bottom line.
A closer look at the guidance
In addition, the company will also expand its unified computing system (UCS) portfolio with a broader product mix in order to meet the demand of large cloud environments. Compared to its peers, Cisco is developing a cloud solution that is interconnected with one another. Over the period of time this would increase its strategic relationship with customers and ultimately drive revenue growth.
For the second quarter, Cisco anticipates revenue growth of 4% to 7%, while it expects earnings to be in the range of $0.50 to $0.52 a share. The company is also looking forward for a strong performance from EMEA regions.
But the Asian markets have not responded well, with main downturn from the Chinese economy and has a gloomy picture for the days ahead. On the other hand, Cisco is positive about its prospects in the U.S and expects it to deliver double digit growth. Not only this, but it has a strong position in the emerging markets and seems to well positioned to take advantage of the growing economies.
Conclusion
Thus on account of all these factors, we get mixed indications for Cisco. The stock rose considerably in the past year and is currently at its 52-week high. Albeit the company’s long term prospects seems to be good but lower than expected sales forecast for the upcoming quarter could have negative sentiments among investors that could weigh on the stock in the near term.
