Cisco Systems, Inc. (NASDAQ:CSCO) Benefits From Increasing Demand for Its New Hardware

Cisco Systems, Inc. (NASDAQ:CSCO) growth rebounded sharply in the latest quarter, fuelled by a major overhaul of its new line of networking hardware. The revenue surged 7% in the 2Q2015, an improvement over the growth of 1.3% achieved in 1Q2015.The net income jumped 68%, despite higher costs related to recent job cuts. The company expects revenue growth to be between 3% and 5% in 3Q2015. The shareholders were delighted as Cisco boosted dividend by 10.5%.

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The analysis

John Chambers, the CEO of Cisco, said Cisco Systems, Inc. (NASDAQ:CSCO) has never even been so well positioned as it is now. . As of now, the growth problems for the company seem to be easing. It has faced tough competition in segment of network-switching equipment. It mattered most to the company as it was its biggest single product category. Most of the geographies excluding China recorded strong demand. Orders were up 20% in Southern Europe and 17% in the UK in 2Q2015. Sales in China slumped 19% in the same quarter.

The competition

Cisco is facing stiff competition from manufacturers of conventional hardware. Also, it has to deal with the current conditions as both small and large firms push a concept called SDN, or software-defined network. The shift to SDN can reduce sales of some specialized switching gear. Cisco Systems, Inc. (NASDAQ:CSCO) strongly responded to the problem, with a new design of its switching line and an alternate on SDN that operates on the new switches. The revenue from switching segment surged 11% to $3.6 billion in the 2Q2015. More than 1,700 customers purchased the new products.

Radical change

Cisco took a risk of disrupting its switching business by introducing changes in its hardware. The move is paying off as the clients assessed the advantages of the new technologies. Unlike other companies who wait to change, Cisco Systems, Inc. (NASDAQ:CSCO) took a bold step to overcome its weakness.

About the Author

Terrel is US Markets Daily's business news reporter. She joined US Markets Daily after five years as a print reporter.

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