Cisco Systems, Inc. (CSCO): Earnings Ahead — What is Chuck Robbin’s Plan for Future?


Cisco Systems, Inc. (NASDAQ:CSCO) recently announced that Chuck Robbin would take over the CEO from John Chambers, on July 26. Therefore, the focus of investors’ would turn towards the new CEO spelling out his plan of action to take the company forward from where Chambers would be leaving. Though he is an insider and aware of the company’s position, he has already indicated that he believed in the culture of the company.

Despite Cisco Systems, Inc. (NASDAQ:CSCO)’s new CEO terming the culture as a significant differentiator, investors and analysts’ would be keen to know more about his plans.  Chambers will remain there till the end of the current fiscal year which ends in July, the focus would be on the objectives to be achieved in the next fiscal year.

Key Factors

Chambers managed the company for over two decades and has weathered number of criticisms during his tenure. Therefore, there is every opportunity for Cisco Systems, Inc. (NASDAQ:CSCO) to turn the direction. Robbin would need to prove himself as a CEO who is ready to make changes on the technology front and also take cue from what is happening in and around the technology world. It could also turn out to be another chapter in the history of the company.

While short term economics pressures in the US and emerging markets could weigh on results, the company’s focus on customer solutions and rapid rise in bandwidth consumption should help the company long term. Risks include increasing competition, white-label products used by big tech players,and downturns in enterprise and government spending.

Product To Drive Revenue Growth

As far as the revenue pattern, the network equipment maker would continue to depend on its products to fuel revenue growth while service segment would supplement the revenue generation. Based on the second quarter results, 76.1% of Cisco Systems, Inc. (NASDAQ:CSCO) total revenue came from product sales while 23.9% of revenue came from the service division.

For the first six-month of the current fiscal year, product revenue accounted for 76.6% while service revenue represented 23.4%. Its cash flow from operations grew to $2.9 billion in the second quarter from $2.5 billion in the first quarter. The revenue pattern is unlikely to change significantly in the third quarter too.

What To Expect

Street analysts expect Cisco Systems, Inc. (NASDAQ:CSCO) to report earnings of 53 cents a share and $12.07 billion revenue for the third quarter. The company delivered EPS of 51 cents and $11.54 billion revenue in the preceding year quarter. This meant that analysts’ are estimating EPS growth of 3.9% on revenue uptick of 4.5% for the third quarter.

Significantly, analysts have not made any changes in their EPS estimations in the last two months. However, three months ago, they were predicting 52 cents a share only. Its earnings also topped the street analysts’ expectations between 1.9% and 6.3% in the last four quarters. Cisco Systems, Inc. (NASDAQ:CSCO) will report its earnings number on May 13 after the bell.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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