Cisco Systems (NASDAQ:CSCO) has had an eventful 2015, filled with both good news and bad news. The stock hasn't done much, ending the year roughly flat, but shares of Cisco have risen by about 40% over the past three years as the company has recovered from a period of declining revenue and profit.
With 2015 coming to a close, here's a look at the worst Cisco headlines of the year.
Feb. 19: HP embraces white-box switches
One of the biggest threats to Cisco is the rise of white-box commodity hardware. Large Web companies like Facebook have been using cheap white-box networking hardware, as well as software-defined networking, to run their data centers, and this poses a challenge to the switching market leader.
Hewlett-Packard Enterprise (NYSE:HPE) has long been a distant No. 2 to Cisco in the switching market, and in an attempt to cash in on the growth of white-box hardware, HP announced in February that it planned to resell commodity hardware produced by a Taiwanese company, running software developed outside of the company. Offering lower prices than Cisco hasn't helped HP win market share in the past, but a full embrace of white-box hardware could allow HP to grow its networking hardware business.
Feb. 25: Trouble in China
Following the NSA spying scandal that has played out over the past few years, the Chinese government has become increasingly skeptical of American technology companies. In February, Reuters reported that the Chinese government's list of approved products for purchase by state entities lacked any Cisco products at the end of 2014. For comparison, the list contained 60 Cisco products in 2012.
Cisco's sales in China have been slumping due to these issues. During Cisco's fiscal third quarter, which ended in April, sales in China declined by 20% year over year.
July 23: Exiting the set-top business
In July, Cisco announced that it was selling its set-top box business to French firm Technicolor for $600 million. Set-top box sales have been in decline, and with the products carrying low gross margins compared to Cisco's core businesses, selling the unit made sense.
The bad news is that this sale confirms that Cisco wasted billions of dollars going after the set-top market. The company acquired set-top box maker Scientific-Atlantic in 2005 for a whopping $6.9 billion, and Cisco's exit from the business marks one of the biggest acquisition mistakes that the company has ever made.
Nov. 1: HP splits up
The old Hewlett-Packard was a lumbering company spanning both enterprise and consumer markets, and not much was going right for the company. In November, the old HP split into two companies, HP, which sells PCs and printers, and Hewlett-Packard Enterprise, which contains the remaining enterprise-facing businesses.
With Hewlett-Packard Enterprise no longer weighed down by the declining PC and printer businesses, the company can focus on growth opportunities in the enterprise. HP has failed to gain much ground in the networking hardware market in the past, as Cisco has been able to maintain its dominant market share, but a more focused and streamlined HP Enterprise could give Cisco a more capable competitor.
Nov. 12: Weak guidance
Cisco reported its fiscal-first-quarter results in November, and while the company managed to beat analyst estimates for both revenue and earnings, weak guidance sent shares falling. Cisco expects year-over-year revenue growth of just 0% to 2% during the fiscal second quarter, compared to 3.6% growth in the first quarter.
Cisco CEO Chuck Robbins blamed macroeconomic uncertainty for the shortfall. "We guided to solid growth in Q2. Our guidance reflects lower than expected order growth in Q1, driven largely by the uncertainty of the macro environment and currency impacts." Robbins said. "Despite these headwinds, I believe we are executing very well. We are moving very fast to capture new opportunities and I feel good about how we are positioned for the second half of the year."
Various firms cut their Cisco price targets following the report, with some analysts concerned that Cisco's weak guidance was due to deeper problems. Ryan Hutchinson of Guggenheim suggested that Cisco's weak enterprise outlook was due in part to uncertainty regarding future networking architectures and the ongoing shift to the cloud.