Cisco Delivers A Promising Turnaround

Networking giant Cisco (Nasdaq: CSCO) has had a remarkable year so far. Its stock has climbed nearly 18% since the start of the year as the company transforms itself to adapt to the newer technologies. Cisco has been moving away from its traditional business of supplying switches and routers into newer areas of cloud and enterprise collaboration.

Cisco’s Financials

Cisco’s Q3 revenues grew 4% over the year to $12.5 billion. It ended the quarter with an EPS of $0.56 on GAAP basis and $0.66 on Non GAAP basis. The market was expecting revenues of $12.42 billion for the quarter with adjusted earnings of $0.65 per share.

By segment, product revenues were up 5% to $9.3 billion. Within the segment, Infrastructure Platforms grew 2% to $7.2 billion, Applications 19% to $1.3 billion, and Security products grew 11% to $0.6 billion. Service revenues grew 3% to $3.2 billion. 32% of its total revenues were from recurring offers, compared with 30% a year ago.

Revenues from Americas grew 2% while EMEA and APJC markets saw growth of 9% and 7% respectively.

For the current quarter, Cisco forecast revenues to grow between 4%-6% for the quarter, compared with the market estimates of 4.75%. It expects to post adjusted fourth quarter earnings of $0.68-$0.70 per share, which is in line with the Street’s estimate of $0.68 per share.

Cisco’s Acquisitions

The enterprise collaboration market is seeing intensified competition. According to Synergy Research Group, within the enterprise collaboration market, Cisco currently is the market leader with 13% share followed by Microsoft with 12% share.

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During the quarter, Cisco made further enhancements to its offering in the space with the acquisition of Accompany, an AI-based relationship intelligence platform, for $270 million. Los Altos-based, Accompany’s database connects people and companies by providing rich, relevant insights about them. Its platform uses machine learning tools and automates search, creation, and suggestions on updating of profiles for corporate executives. Prior to the acquisition, Accompany had raised $40.6 million at an undisclosed valuation. The acquisition will help further strengthen Cisco’s collaboration portfolio and also take on Microsoft’s LinkedIn. Accompany’s founder Amy Chang will join Cisco’s collaboration group.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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