Cisco’s Earnings Boosted by New Ventures

The raging United States v China trade war has had a huge impact on the earnings of a wide range of companies across industries. However, American hardware giant Cisco Systems Inc beat analysts’ estimates and declared robust earnings in the fourth quarter on Wednesday. The primary reason behind the robust earnings was a good show from some of the new businesses that the company had launched. According to reports, a host of newer applications and businesses related to security boosted the company’s revenue in the fourth quarter of 2018. The stock price predictably rose following the announcement of the earnings and rose as much as 4% as Cisco also announced a wide range of updates that is going to make investors happier. The company expects to beat analysts’ estimates for the third quarter as well, and in addition to that, the announcement of the quarterly dividend further boosted investor sentiment.

Over the recent months, analysts on Wall Street have been cautioning about the impact of the United States-China trade war on Cisco’s revenues, but the latest earnings report puts those worries to bed. However, what would come as a bigger boost to investors is the fact that the Chief Executive Officer of Cisco, Chuck Robbins dismissed those fears and stated that the demand for the company’s products was robust in the fourth quarter. Speaking about the trade war and its impact on Cisco, Robbins said, “It certainly is one of the more complex macro geopolitical environments that I think we’ve seen in quite a while with all the different moving parts. But to be honest, from the first day of the quarter to the last day of the quarter, we saw zero difference.”

Acquisitions have been a big part of Cisco’s strategy ever since Robbins took the top job back in 2015 and although hardware remains the heart of the business, the company has now diversified into a range of businesses. It is now a well-known player in businesses like cybersecurity, cloud computing, and software. Those businesses have helped the company in boosting their earning at a fast clip in the recent past. The demand for routers and other hardware products has dropped recently, but due to the existence of these businesses, Cisco finds itself at a much stronger position. An analyst at Morningstar said as much, “Strong growth in areas like security and software-defined networking are indicative of Cisco staying a leader in nascent technologies and possibly turning into more spend per customer or opening up new opportunities.” 

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