After four consecutive quarters of a drop in revenues, shareholders finally received some good news after Cisco Systems, Inc. (NASDAQ: CSCO) reported better than expected profits and revenues for its first quarter of fiscal 2021. While the COVID-19 pandemic has been a headache for most companies across the globe, it also caused led to increased demand for network services, teleconferencing tools, and cybersecurity. Cisco managed to catch that wave.
Q1 (FY2021) Earnings Report
Although Cisco’s revenues in Q1 of fiscal 2021 are down 9% to $11.93 billion, that is still above the market expectation of $11.85 billion. A similar situation applies to profits. Cisco reported that fiscal first-quarter profit decreased from $2.9 billion (68 cents a share) to $2.2 billion (51 cents a share). However, excluding certain items, the reported profit for the fiscal first quarter was 76 cents a share, which is above the analysts’ projected profit of $71 cents a share. These are encouraging signs that offer a glimpse of improvement which should ensure long-term growth and help the business to navigate successfully through the pandemic.
Competition
Cisco was already experiencing a slowdown before the pandemic had hit, so these positive results have been long awaited. Hewlett Packard Enterprise Company (NYSE: HPE) also managed to board the pandemic train in an attempt to get back its revenues on the track. HP announced that its partnership with Wipro Limited (NYSE: WIT) will launch new HPE GreenLake cloud services that provide support to a remote workforce and business continuity. This new service for Virtual Desktop Infrastructure will enable the companies to increase the number of employees more easily, enhance productivity by reducing the timeframe, all the while having more control and security and resulting in lower costs.
Dell Technologies Inc. (NYSE: DELL) stock seems to be doing just fine, even with the fact that Dell did not really surf the wave of improved sales of desktops and laptops as universities keep transferring their classes online and employees continue to turn their homes into offices. Computer sales did grow between 3.6% and 14.6% during Q3 of FY2020. But, unlike Lenovo (OTC: LNVGY) and Apple Inc. (NASDAQ: AAPL) which shipped more units in Q3 2020 than a year before, Dell delivered 4.5% fewer units than last year. Perhaps the reason is that Dell is focused on the new hybrid-cloud spinoff of its most valuable asset, VMware, Inc. (NYSE: VMW).
Outlook
Cisco’s revenues forecast for Q2 of FY2021 is within range of flat and drop 2% when looked year over year, which corresponds to the range between $11.8 billion and $12 billion. These are overall good news for the investors. It could seem a bit optimistic to some, but the rational behind the figures is a strong backlog of orders, which implies large transactions. If this assumption holds, investors will be able to maintain the feeling of relief in the fiscal second quarter they gained after fiscal first quarter results were announced.
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