Cisco Systems reported a decline in fourth quarter earnings on Wednesday, according to CNBC and other sources. Cisco’s switching sales, its largest product category, fell 9% year over year. Its second-largest category, routing, also fell 9%. Cisco's two largest product categories, switching sales and routing, both fell 9%. The company forecast further declines for the current quarter.
CFO Kelly Kramer announced during a conference call that the company will begin describing its revenue by the categories of "infrastructure platform, applications, security, services and other" going forward, according to Barron’s. Those categories are a better match for the company’s evolving business, Kramer said.
Despite drops in key categories, Cisco beat analysts' estimates for earnings per share and met expectations on revenue. Revenue dropped 4% in its seventh consecutive quarter of revenue decline.
CEO Chuck Robbins chocked it up to a "transformative year," and indeed Cisco is in the midst of a major shift. Those kinds of changes take time.
As Cisco transforms itself from a hardware company to a software company, the strategy counts just as much as the numbers. Robbins said during the conference call with analysts that revenue from subscriptions now represents 51% of Cisco's software revenue.
As part of its reinvention, Cisco has illustrated to customers where it thinks the market is heading. In June, Cisco introduced intent-based networking, a new approach that company officials say can recognize intent, mitigate threats and learn over time. The introduction of intent-based networking is an effort to remain relevant to the enterprise. Upcoming quarters will reveal whether those efforts pay off.