Cisco Systems seems like a relic, a company of the past era of the dot com boom. It is not as attractive as Microsoft or Apple, corporations that seem to have a hand in everything related to technology. But does that mean that Cisco is irrelevant or that it is dying?
Sure, people looking at the company might be in dismay from the fact that it showed a decline in earnings. But Cisco Systems is not alone in this regard. They are in the same category as many other entities that saw their revenues decline due to COVID-19. Diving deeper, the company does face some other issues from the competition and other tailwinds that would contribute to COVID-19 agnostic decline.
The technology corporation seems to be far from death with a strong balance sheet and robust business lines. Further, Cisco System has a few critical components going for it that can help it chug along.
Let’s find out more about Cisco Systems and its value in the world today.
Cisco Systems in 2020
Cisco Systems Headwinds
A trade war with China did not help Cisco Systems revenues. For instance, Cisco’s CEO notes, “[w]e’re just being … we’re being uninvited to bid,” in regard to Chinese business proposals. The corporation saw difficulty in getting a seat at the table in the rising Asian market. Cisco’s CEO continued by noting ““[we] definitely saw significant impact on our business in China as it relates to what’s going over the trade war right now.”
But the generic competition to its computer networking hardware is also a problem that the technology giant must account for in the present. Essentially, more corporations trust that non-brand name providers can provide reliable and sufficient networking hardware. An increasing base of enterprise consumers thinks that they can bypass Cisco Systems and go straight to these white boxes.
Further, the major technological trend of cloud computing eats into Cisco’s current networking hardware business lines as well. That doesn’t bode well for Cisco.
How are they combating these issues, and what do they rely on for growth?
The Opportunities for Cisco
If the hardware segment is dying, then switch to software. Guess what? That’s becoming a part of the Cisco strategy as they help companies focus on digital transformation. This is in line with Apple and Microsoft, who are focusing more on improving the user experience through software and other channels.
Cisco purchased AppDynamics to bolster growth and corporate value. It looks like it was a great purchase as more companies are turning to this platform to monitor their infrastructure.
Products such as Cisco Umbrella, AMP, trusted access suite, and the stealth watch cloud platform is among their security offerings that are seeing demand.
The networking company does have recurring revenue segment with many of its software offerings. It is investing more effort in increasing these sales and it showing slight upticks in progress.
5G and IoT
Don’t discount Cisco Systems and its hardware segment when talking about the future. Ushering in 5G will require significant effort from many corporations that will provide the infrastructure and technology backbone.
Proper infrastructure and hardware will allow for a reliable rollout of 5G. Companies such as Telefonica work with Cisco to have the right partners to enable effective 5G deployment.
That is why Cisco is unveiling a portfolio of equipment that will help to provide value to the growing 5G demand. “The “Internet for the Future” strategy includes Cisco Silicon One, “a first-ever single, unified silicon architecture that can serve anywhere in the network and be used in any form factor” the company notes.
Essentially, Cisco will provide services, automation, hardware, client services, and be involved in other ways.
Balance Sheet and Financials
Users can expect growth and consistent demand based on enterprise spending to upgrade and improve their organizations over the next decade. Another aspect of Cisco that one can’t knock it’s robust balance sheet and profitability. The company holds a decent cash position and experiences relatively healthy operating cash flows.
Cisco is far from being a dying company and is poised to take advantage of cybersecurity, 5G, IoT, and other technological opportunities despite revenue setbacks in the present.