About the company

Cisco Systems, Inc. is a global technology leader focused on delivering innovative solutions for network infrastructure, cloud services, and communications. Since its founding in 1984, the company has become an icon in the networking and information technology industry, providing a wide range of products and services for businesses and consumers. Cisco is known not only for its technological innovations, but also for its commitment to sustainability and social responsibility, making it an important player in the information technology market worldwide.

New technology solutions from Cisco Systems

Cisco Systems, Inc. unveiled new additions to its line of office collaboration appliances at Enterprise Connect, focusing on hybrid work environments. One is the Cisco Board Pro G2, a versatile communications panel suitable for a variety of workspaces, featuring a 96-megapixel dual camera and NVIDIA chips for higher quality video transmission and advanced artificial intelligence-enabled features. Another product is the Cisco Desk Phone 9800 Series, designed for the modern office layout and offering personalised features from booking to joining meetings, for which it uses encryption and high-end security features. Jeetu Patel, executive vice president of the company, points out that the new devices are designed to fill the technology gaps in collaboration and communication in hybrid workplaces that employees and employers alike point to.[1]

Acquisition for the purpose of expanding the field of activity

Cisco recently completed its $28 billion acquisition of analytics company Splunk Inc. With this, Cisco has expanded its reach into the data business. On one side is to be the company with its renowned networking solutions and on the other is Splunk with its monitoring and security systems, both offering enterprises a comprehensive interplay of efficiencies. Cisco CEO Chuck Robbins expressed his excitement about a future where data will play a major role in connectivity and protection. Similarly, Gary Steele, executive vice president and general manager of Splunk, emphasized the invaluable benefits this connection will bring to customers. As the business landscape increasingly embraces the transformative power of artificial intelligence, Cisco's strategic acquisition of Splunk appears to be a key milestone in its journey to embrace this technological revolution.[2]

Financial results

Cisco's fiscal year 2023 ended July 29, 2023, and for the period it reported revenues of $57 billion, up 10.55% year-over-year, with profits of $12.61 billion, up 6.78% over the same period a year earlier.[3] Results for the second quarter of fiscal 2024, the period from October 29, 2023 to January 27, 2024, were marked by a 6% decline in revenue to $12.8 billion compared to the same period last year, as the company demonstrated strong operating leverage and return on capital, while highlighting revenue growth in security, collaboration and monitoring. Total software revenue remained flat year-over-year, with software subscription revenue up 5%. The company's dividend rose to $0.40 per share, a 3% increase.[4]

Company outlook

Looking ahead, the company provided guidance for the third quarter of fiscal year 2024, expecting revenue between $12.1 billion and $12.3 billion and earnings per share in the range of $0.51 to $0.56. For fiscal year 2024, Cicso expects revenue between $51.5 billion and $52.5 billion with earnings per share between $2.61 and $2.73. Despite the revenue decline, Cisco plans to continue to focus on innovation and future growth opportunities in an increasingly connected ecosystem.[5] [1]

Investment bank Piper Sandler expects the impact of Splunk's systems integration to have positive benefits that may also impact Cisco's future earnings, with their estimates through fiscal 2026 calling for a potential $0.17 accretion to earnings per share and a $1.2 billion increase in free cash flow. [2] While there is optimism about the potential benefits of the Splunk acquisition, there is also uncertainty about Cisco's core business, leading to the decision to keep Piper Sandler neutral.[6]

Cisco Systems, Inc. stock price trend over the last 5 years. (Source: Google Finance)*

Conclusion

It is clear that Cisco is another technology company that understands that it needs to keep up with the times and therefore is committed to the artificial intelligence sector, which it uses in its solutions. Introducing new products as well as teaming up with Splunk may seem like the right strategic move in the face of growing demand for AI capabilities and efficient data handling. Cisco's emphasis on security and sustainability also demonstrates a commitment to meeting the ever-evolving needs of businesses while taking environmental impacts into account. These innovations appear to be closely aligned with current trends in the technology market.

Adam Austera, Chief Analyst at Ozios

[*] Past performance is no guarantee of future results

[1,2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.

[1] https://www.investing.com/news/stock-market-news/cisco-unveils-new-aienhanced-office-devices-93CH-3351877

[2] https://www.investing.com/news/stock-market-news/cisco-finalizes-splunk-acquisition-to-enhance-data-insights-with-ai-93CH-3341970

[3] https://www.google.com/finance/quote/CSCO:NASDAQ?window=5Y

[4] https://investor.cisco.com/news/news-details/2024/CISCO-REPORTS-SECOND-QUARTER-EARNINGS/default.aspx

[5] https://investor.cisco.com/news/news-details/2024/CISCO-REPORTS-SECOND-QUARTER-EARNINGS/default.aspx

[6] https://www.investing.com/news/stock-market-news/piper-sandler-raises-cisco-stock-price-target-to-51-on-splunk-deal-impact-93CH-3345757