It is not that Cisco is not making any big profits anymore. On the contrary, analysts’ expectations are surpassed in the past quarter. However, the outlook for distress. The share price declines. The network equipment provider Cisco Systems has met the expectations of the market in its fourth quarter, but expects a further decline in sales in the current quarter. The stock subsequently lost 1.8 percent in post-trading on nasdaq.com in a first reaction.
Cisco is currently undergoing a deep restructuring process in which the tech giant wants to break with its traditional reliance on routers and switches – a highly competitive market with declining margins – to enter new niches of activity, such as cybersecurity or software. But, today, its main business is still the sale of switches which generated $5.3 billion. Cisco’s revenue for services in the fourth quarter of 2017 amounted to $3.1 billion, up 1 percent from the previous year.
Cisco’s profit fell to $2.4 billion, or 48 cents, in the quarter at the end of July. In the comparable prior-year period, Cisco had earned $2.8 billion, or 56 cents per share. Adjusted for special effects, earnings per share were 61 cents, which is exactly the consensus forecast for the analysts. Sales fell by 4 percent to $12.1 billion.
In detail, revenues from core businesses were lower: switches (-9%), routers (-9%), data centers (-4%), collaborative tools (3%). The only positive note is to be found on the side of wireless solutions (+ 5%) and security (+ 3%).
The company itself had forecast a profit per share of 60 to 62 cents and a sales decline of 4 to 6 percent.
Grow in IT-Solutions
For the current first quarter of fiscal year 2017/18, Cisco expects to see adjusted earnings per share of 59 to 61 cents. Analysts estimate so far with 60 cents. The gross profit margin (non-GAAP) is expected to be 63 to 64 percent. According to estimates by the Group, sales will fall by 1 to 3 per cent.
Chief Executive Officer Chuck Robbins has been trying for some time to focus more on software and services and to become less dependent on the hardware business. There, Cisco suffers from low customer spending. Especially in the fragmented market for IT security the network specialist wants to grow.