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May 2017 Proved to Be a Roller Coaster Ride for Cisco Stock

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Cisco’s stock journey in May

So far in this series, we’be discussed the strategic acquisitions announced by Microsoft (MSFT) and Cisco Systems (CSCO). In early May 2017, Cisco stock reached a new 52-week high when it received a double upgrade from Credit Suisse

However, after the announcement of its fiscal 3Q17 results, CSCO stock fell close to 8%. This fall happened despite Cisco’s fiscal 3Q17 earnings exceeding analysts’ expectations. 

Cisco Systems (CSCO) expects its revenues in the current quarter to fall 4%–6%. Industry analysts and markets projected this fall in revenues despite the company spending billions of dollars on acquisitions, making it difficult for Cisco to record top-line growth.

Plus, 1,100 job cuts announced along with its earnings further subdued the market sentiment for Cisco stock.

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Strategic acquisitions failed to generate revenues

The chart above includes estimated annual revenues for 2017 according to Cisco Systems’ reduced fiscal 4Q17 guidance forecast. Since 2012, Cisco has bought 49 companies, ranging from startups to established companies. These acquisitions were intended to gain competitive advantage, boost revenues, gain domain expertise, and increase access to next-gen technologies.

Cisco Systems has not disclosed how much it spent on 28 of its 49 acquisitions. For the remaining 21 acquisitions, which it completed in the last five years, it has spent close to $18 billion. However, Cisco’s revenues have failed to grow and after four years of stagnation, are declining.

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