Cisco Systems, Inc. Earnings: Will Revenue Ever Recover?

The networking giant is poised to see its sales fall yet again. Can Cisco come back?

May 13, 2014 at 10:28PM

On Wednesday, Cisco Systems (NASDAQ:CSCO) will release its quarterly report, and once again, investors expect that the networking giant will see its revenue drop. So far, Cisco has been able to keep its profits relatively stable despite the declines in sales, but with ongoing competition from IBM (NYSE:IBM) and Oracle (NYSE:ORCL) to capture enterprise customers and offer them the widest possible range of products and services -- including those related to networking -- the question Cisco Systems faces is whether it can sustain its leadership role in networks while expanding to serve a greater portion of its clients' overall IT needs.

Cisco Systems has struggled for a long time, as it seeks to reinvent itself. At the dawn of the Internet, Cisco was the darling of the tech boom, with the limitless possibilities of networking lying before the company. But some strategic missteps left Cisco vulnerable to competition, and players both large and small took advantage, leaving Cisco with the challenge of recapturing at least part of its former glory. Let's take an early look at what's been happening with Cisco over the past quarter and what we're likely to see in its report.

Barclays Center. Source: Cisco Systems.

Stats on Cisco Systems

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$11.38 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Cisco earnings hold up with less revenue?
Investors have actually been a bit more optimistic about the long-term prospects for Cisco earnings, with full-year fiscal 2014 estimates rising by a penny per share and next year's projections up by triple that amount. The stock has stayed stuck in neutral, though, rising less than 2% since early February.

Cisco's fiscal second-quarter earnings report back in February continued its string of weak sales, as revenue fell by nearly 8%. Yet investors were actually pleased with those results, as they were a bit better than the company's previous guidance for the quarter. Moreover, some positive signs emerged from the report, as Cisco's enterprise and commercial business in the U.S. saw orders jump by double-digit percentages. Emerging markets also bounced back somewhat, with declines of just 3% marking dramatic improvement from the 12% decline in the fiscal first quarter.


Source: Cisco Systems.

But Cisco Systems realizes the need to go beyond business as usual if it wants to match up to Oracle and IBM. Cisco's plan to spend $1 billion on its Cisco Cloud Services concept has great potential to transform the company's overall business if it can distinguish itself from the many other companies seeking to make cloud-computing offerings to enterprise customers. In particular, given the price war in the basic cloud services niche, Cisco needs to develop a higher-level premium product if it wants to win customers and avoid the commoditized pricing that will prevent even a successful launch from suffering from razor-thin profit margins.

High-profile projects might go a long way toward reestablishing Cisco's dominance in connectivity and fending off Oracle and IBM. One big challenge it has successfully tackled is to make professional sports stadiums Wi-Fi friendly, with the Barclays Center basketball arena in Brooklyn sporting unparalleled connectivity for tens of thousands of fans. A number of other baseball and football venues have also used Cisco to improve their Internet availability and make them more attractive to younger fans.

The Internet of Things is another big area in which Cisco expects to go head-to-head with IBM and Oracle. As interconnected products start giving users the ability to collect and analyze data, Cisco hopes not only to make that connectivity possible but also help secure it from outside interference. As part of the Industrial Internet Consortium with IBM and other tech giants, Cisco is trying to establish standards for the broader industry, but Cisco also has an opportunity to further its own ends with proprietary solutions if the consortium fails to meet its cooperative goals.

In the Cisco earnings report, watch to see how well the networking giant does in broadening its appeal with a wider set of products and services. With IBM and Oracle breathing down its throat, Cisco Systems needs to demonstrate its ability to innovate in a dog-eat-dog tech world.

Are you ready to profit from this $14.4 trillion revolution?
Every investor wants to get in on revolutionary ideas before they hit it big -- like buying PC maker Dell in the late 1980s, before the consumer computing boom, or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hypergrowth markets. The real trick is to find a small-cap "pure play" and then watch as it grows in explosive fashion within its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 trillion industry. Click here to get the full story in this eye-opening report.

Click here to add Cisco Systems to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and Cisco Systems and owns shares of, IBM, and Oracle. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers