This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cisco's Changeover Will Dominate Tech

NEW YORK ( TheStreet) -- This recent earnings season hasn't been kind to techs stocks. With several companies reporting subpar quarters and lowered guidance, Cisco (CSCO - Get Report) continues to stand out. And with each passing quarter, the networking giant continues to make a case for why it is one of the best bargains on the market. And if second-quarter earnings are any indication, more gains are around the corner.

Revenue arrived 5% higher year over year and advanced 2% sequentially. And there were signs that Cisco is still working to transition out of its hardware business. For instance, its core routing and switching businesses, which suffered of late, continue to erode. This is why Cisco has spent a good portion of its $45 billion cash hoard on recent acquisition for Meraki, Cariden and most recently BroadHop.

In many respects, it's working. Although the routing business shed 5% in revenue year over year, it now comprises 1% less of Cisco's overall sales. But that's a good thing in this case since the hardware margins haven't been that great. In the meantime, Cisco's other businesses continue to pick-up the slack. Wireless revenue grew 20% year over year.

This means Cisco is doing better than holding its own against rivals such as Aruba Networks (ARUN) and F5 Networks (FFIV - Get Report). Likewise, data center revenue surged 65% year over year. The company continues to outperform the likes of Dell (DELL) and Hewlett-Packard (HPQ). But there's some struggles on the security side, which grew by only 1%.

This is the area that is dominated by market leaders Check Point Software (CHKP) and Fortinet (FTNT). But Cisco should be able to turn this around with a few more key acquisitions. Profitability weren't that great this quarter as non-GAAP gross margins arrived lower sequentially and year over year. Quite a bit of this struggle had to do with the product mix. The company made up for it in operating income, which advanced 4%.

All in all, it was an exceptional quarter. Even more impressive, this brings Cisco earnings beat to eight consecutive quarters. And there are no meaningful signs of slowing down. In terms of guidance, the company is projecting 4% to 6% revenue growth for the third quarter. It wasn't as high as the Street would like, but it is consistent with the company's recent performances.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
DELL $0.00 0.00%
ARUN $0.00 0.00%
CSCO $26.86 -1.86%
FFIV $100.96 -2.60%
PANW $147.01 -3.21%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs