Networking equipment and software provider Cisco Systems, Inc. (NASDAQ : CSCO -$46.55) reported in-line results for the fiscal fourth quarter. However, guidance was below expectations and the shares are down about 8% in response. Total revenue of $13.4 billion matched Street estimates and grew 6% year-over-year, with around 10% of the advance coming from acquisitions. Total product sales increased 7% and service revenue rose 4%. The pricing environment remains in good shape and the company’s operating margin increased 140 basis points. Earnings per share of $0.83 increased 19% from last year and beat consensus by a penny.
The core Infrastructure Platforms division’s sales were up 6%. Switching increased at a double-digit pace thanks to solid demand for data center gear and the flagship Nexus 9000 product line. Too, the Catalyst 9000 line of wireless switches added more customers than in any other prior period. Router sales decreased markedly, owing to continued softness from service provider customers. Applications revenue was up 11%, with collaboration, AppDynamics and Internet of Things software growing double digits. The Security division recorded a 14% advance. Software subscriptions were 70% of total software revenue, up 12 percentage points versus the prior-year quarter.
For the first quarter of the new fiscal year, Cisco is guiding for revenue growth in the range of 1% to 2%. Earnings per share is expected to come in between $0.80 and $0.82 reflecting year-over-year growth of 7%-9% and much in-line with analyst expectations. Although the near-term outlook for Cisco is less than ideal, the company remains well positioned to take advantage of many long-term growth drivers in the technology space. I still maintain that the stock, yielding 2.8%, holds solid risk-adjusted investment prospects overall.