One good quarter may not necessarily signal glad tidings for a company.
But, after a lean patch, when it was in and out of the consumer market (home networking with Linksys and Flip HD cameras, for instance), Cisco Systems has staged a smart recovery, with the last few quarters suggesting that it is back on a sustainable growth trajectory.
Cisco vs Apple
Cisco owned the iPhone trademark that Apple used without any business arrangement. However, the two companies reached an out-of-court settlement and moved on.
That aside, Cisco is hardly a match for Apple in terms of revenue and value for investors though, at the height of the dotcom boom, it came close to being the world’s first trillion-dollar company.
Now it is nowhere near that milestone. Apple has stolen a march over it, hitting a market value of $770 billion recently.
Boxes or Business Outcomes: Last night, Cisco released its Q2 results that showed the company beating the Street pointing to continued signs of a rebound. Its bread-and-butter products, routers and switches, have once again demonstrated their value to the company.
But Cisco CEO John Chambers has always held that it was less about selling boxes and more about selling solutions. He has been quoted as saying yesterday that “it is business outcomes, not selling routers and switches.” He was referring to the solid growth that the company saw in Europe.
No Downward Guidance: Mr Chambers usually has this habit of providing downward guidance for the next quarter. But this time he broke with tradition and sounded upbeat with a projection of 51-53 cents per share for the current quarter. That was in line with analysts’ expectations.
Even last November, while the Q1 revenue was better than expected, Mr Chambers gave weak guidance saying that there could be slower spending from some of their top service providers such as AT&T.
That weak guidance notwithstanding, Q2 results turned out to be the best for the company in three years.
30 Billion Devices: With a lot of hope pinned on the business potential of the Internet of Everything (IoE), which is how Cisco refers to the Internet of Things (IoT), happy days may be here again for the company.
Research groups such as Gartner expect about 30 billion devices to be on the IoE/IoT by 2020 and networked connections among them assume mammoth significance, bringing technology and data together.
Turn Data Into Actions: For Cisco, this is an opportunity for it to help turn “information into actions that create new capabilities, richer experiences, and unprecedented economic opportunity for businesses, individuals, and countries.”
For the record, Cisco’s Q2 revenue rose 7 percent to $11.94 billion, with a net profit of $2.4 billion, or 46 cents per share, in the quarter from $1.43 billion, or 27 cents per share, a year earlier. On an adjusted basis, the company earned 53 cents per share as against an. Analysts on average had expected earnings of 51 cents per share on revenue of $11.8 billion.
A dividend of 22 cents per share will be paid to shareholders in April 2015.
While its performance in Europe was strong, sales remained sluggish in China. This is no surprise as local competition from the likes of Huawei and ZTE will always be intense.
G Joslin Vethakumar