Cisco Systems Inc. (CSCO) seems to be making great strides in its business model shift, but that hasn't done much to lift its sagging revenues

Earlier this week the networking giant reported largely in-line fourth-quarter results, with earnings of 61 cents per share and $12.13 billion in revenue. That's compared to consensus estimates of 61 cents per share and sales of $12.06 billion. Revenue declined 4% annually, and Cisco said it expects that trend to continue in the fiscal first quarter, with revenue projected to fall between 1% and 3% year-over-year and earnings in the range of 59 cents to 61 cents per share -- both of which are generally in line with Wall Street's estimates. 

Legacy businesses like routers and switching continued to post year-over-year declines, while newer segments like security and wireless saw incremental annual growth. 

The results sent Cisco's stock lower and shares continued to a close of $31.04 on Thursday. The stock is up 2.6% so far this year, and traded up slightly in premarket trading.

Wall Street analysts were disappointed that core businesses like switching continue to weigh on Cisco, but said the transition to recurring revenue should start to make an impact soon. Here's what they had to say about the quarter: 

Mark Moskowitz, Barclays (Overweight, $34 Price Target) 

"We expect shares of Cisco to find firmer footing in the coming days. While consensus estimates could reset lower, the magnitude stands to be minor and much better than feared. Beyond the results, we think investors had expected the wait for a bottoming in Cisco's Y/Y revenue declines to be measured in quarters or even years. In contrast, we think the revenue profile could be close to bottoming in the near term." 

Ittai Kidron, Oppenheimer (Outperform, $36 PT) 

"A generally weak macro backdrop, secular challenges in certain products markets, and Cisco's business model shift continue to weigh on top-line growth. At the same time, we feel that Cisco is executing well, keeping costs/margins stable. Overall, Cisco has laid out a compelling vision for its focus around software and subscription-based model and metrics on the shift are encouraging, but the transformation will weigh on revenue growth for quarters/years to come. While near-term upside will be difficult to deliver, we see the shift driving long-term economic upside to Cisco. Meanwhile, a strong balance sheet limits downside." 

Tim Long, BMO Capital Markets (Market Perform, $32 PT) 

"Cisco was encouraged by early feedback and traction for its new Catalyst 9000 switch, with the majority of customers opting for the most advanced subscription offering. Beyond that, switching was weak in the quarter, with a 10%+ Y/ Y decline in campus switching and flat revenues in the data center, though ACI grew 38% Y/Y. Cisco is clearly losing share and its performance significantly lags the recent growth of Arista Networks (ANET) at 50% Y/Y and Juniper Networks (JNPR) at 32% Y/Y this quarter...Recurring revenue growth metrics remain strong, but Cisco is still in the early stages of transitioning." 

Jayson Noland, R.W. Baird (Outperform, $38 PT) 

"Service provider results were again weak, with orders down (7%) year-over-year and over the last five quarters: (7%), (10%), (1%), (12%), (5%). Management highlighted three potential opportunities to drive improvements in service provider over the three to seven quarters: 1) increased presence in webscale, 2) [silicon] innovations (as discussed at the Financial Analyst Conference), and 3) a combination of macro improvements and technology transitions."

Jeffrey Kvaal, Nomura (Neutral, $29 PT) 

"Both F4Q results and 1Q guidance were in line with expectations of a sales decline. Cisco offered little rationale for medium-term recovery toward their new 1-3% target, which we already considered aggressive. Cisco's balance sheet story, however, remains healthy."

Shebly Seyrafi, FBN Securities (Outperform, $35 PT) 

"The stock is looking to exhibit weakness today as key product areas like switching and routing each declined by 9% Y/Y and missed consensus. CSCO ascribes the weakness in switching to a product transition (to it new intent-based networking portfolio of the Catalyst 9000 family of switches) and to weakness in campus (although ACI was up 38% Y/Y). Therefore, we expect switching growth to improve (though still decline) in the current quarter. We believe that strong competition from Arista Networks (O-rated) is an additional factor explaining the switching weakness. The large routing declined was driven by weakness in enterprise access and by a spending pause related to the company's acquisition of SD-WAN company Viptela (deal closed Aug. 1)...Security revenue of $558M, however, grew by only 3% Y/Y and missed consensus of $581M due to weakness in legacy firewalls."

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