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What Will Cisco Do in 2014?

Anders Bylund
December 19, 2013

Cisco Systems (NASDAQ: CSCO) is having a rough year. Shares of the networking equipment builder are up just 6% in 2013, while its Dow Jones (DJINDICES: ^DJI) peers as a whole have risen 23%. The company beat earnings estimates in each of the four quarterly reports this year, but often followed up with weak guidance.

Can Cisco bounce back from this disappointing performance next year, or will 2014 be another 12 months of frustration for Cisco shareholders?

Cisco by the numbers
Analysts expect Cisco to report adjusted earnings close to $2 per share in calendar year 2014, which is no change from late-stage 2013 estimates. Revenue is seen shrinking 2% to roughly $47 billion.

Last week, Cisco CFO Frank Calderoni reduced his long-term revenue growth targets from approximately 6% a year to something more like 4.5%. His earnings targets remain close to Wall Street's estimates, but the current streak of 15 quarters with year-over-year revenue growth is going to end this month.

That's a scary prospect when your recent revenue history looks like this:

CSCO Revenue (Annual) Chart

CSCO Revenue (Annual) data by YCharts.

The Cisco story, in English
Let's hear it straight from CEO John Chambers. Speaking at last week's annual investor confab, Chambers spelled out exactly how he's looking at 2014:

This next year will be the year of architectures. What's going to be the key turning point this year is, it won't be about architectures by business entity group. It's about how you work horizontally across all the business entities to solve your customers' problems.