But I don't believe Cisco was just buying growth. As the company works to become a broader IT supplier with a greater software bias -- a strategy in which Sourcefire fits perfectly -- I expect Cisco's long-term profit margin and cash flow will also get a boost.
The good news here is this company has now created a "bridge" between its weakening hardware business, which has posted soft margins, to its SDN and services businesses, which is expected to outperform for the next three to five years.
Don't mistake this for any assumption that Cisco is suddenly becoming a pushover in hardware. Despite this recent weakness, neither Juniper (JNPR) nor Hewlett-Packard (HPQ) have been able to mount any type of attack. That Cisco's routers and switches still power more than half of the Internet speaks to how superior the products have been and how wide the gap remains between rivals.
Also, when considering that AT&T (T) and Verizon (VZ) have begun recent 4G upgrades on U.S. wireless networks, it's tough to see how anyone can discount Cisco's hardware position. These upgrades will fuel Cisco's hardware revenue. Investors can't lose.On Wednesday, I expect both revenue and earnings to be on the upside of the company's guidance, which should propel the stock higher. Let's not forget this stock has shown a history of jumping by as much as 3% following the company's earnings reports, notably in the last two quarters. But as always, what will determine the stock's overall reaction is how management guides for the next quarter. I wouldn't be so caught up on guidance; it's too narrow-minded. This is still a long-term story. Until anything changes from a cash-flow perspective, which would impact Cisco's long-term revenue growth rate of 5%, this stock remains a strong buy. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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