Cisco Systems, Inc. (NASDAQ:CSCO) dropped by roughly 5 percent prior to the earnings call on Wednesday and this has largely been attributed to soft guidance that had been provided.
Cisco is said to have given a soft July quarter guidance and as a result, the shares had gone down by more than 7 percent in after-hours trading. This loss meant that the stock lost a significant proportion of the gains made this year. The company is currently on a rocky path as shown by the stock performance but hopefully things will get better.
Product order trends could also be a culprit
Cisco’s CEO Chuck Robbins and Kelly Kramer, the firm’s Chief Financial Officer had also made some comments about product order trends and this is also believed to have contributed to the bearish trend. The markets had also seem to have been satisfied with the numerous explanations that the company gave for the poor outlook. The tech giant has also been facing a lot of competition in the hardware industry. The poor performance was thus a combination of different factors with the main one being the soft guidance that had been provided.
Cisco’s soft guidance illustrates that a lot of progress is required to overcome the pressure that the company has been experiencing in the hardware business. The tech giant experienced a 5 percent decline in data center revenue and it blames this loss on the fact that the industry shifted from Blade servers to Rack servers. As for the company’s future, particularly in software, Robbins hinted that there might be acquisitions that will be aimed at positioning the firm to take advantage of opportunities in the software market.
Despite the plummeting stock, Cisco still managed to make some progress in some sectors such as the mainstay switching business which covers about 29 percent of the firm’s revenue. This business also accounts for 39 percent of the company’s product revenue and it managed to secure about 2 percent growth with revenue reaching $3.49 billion in Q3. This was after a previous decline by 6 percent in the previous Quarter. Unfortunately, the growth in the sector did not alleviate the bearish sentiments on Cisco’s stock.
Cisco stock closed the latest trading session on Wednesday at $33.82.