Tomahawk, WI 12/16/2013 (BasicsMedia) – Cisco Systems, Inc. (NASDAQ:CSCO) feeds the telecoms industry with networking equipment. Its devices are used largely in the U.S., Europe, and China. Other emerging markets such as Brazil and India are also big consumers of its networking equipment.

The company is the industry leader going by its market share and revenue figures. However, in recent times, things have refused to remain the same for Cisco Systems, Inc. (NASDAQ:CSCO). Competition is trimming its revenue and profits as time goes by and the company is seen trying to adjust its operations and increase investment in other segments such as software and cloud computing to support its declining equipment segment.

Cisco Systems, Inc. (NASDAQ:CSCO) stunned the market in November at the release of its quarterly data by announcing that it was expecting its revenue to decline between 8 – 10 percent in the present quarter and even thereafter. This came even as Wall Street was predicting that the company could increase its revenue and profits in the upcoming quarters.

Following this bleak outlook, investors reacted by slashing their hold in the stock. However, many investors are still optimistic that the company could perform better in the current quarter than what it announced.

Cut in long-term target

Cisco Systems, Inc. (NASDAQ:CSCO) is not one of those tech companies that investors can just wish away, and it thus makes sense why investors are still seeing light at the end of the tunnel. However, if what the company did in the current week is anything to go by then there is another reason to stay in the sidelines as concerns this stock.

The company announced a review of its longer-term target. This target focuses on the company’s growth in the next three to five years. Initially, CSCO announced that it expected growth of between 5 and 7 percent over the said longer-term target. However, this has now been slashed to between 3 and 6 percent. Obviously, this suggests that the management acknowledges the existence of some serious challenges which the company faces.

Concerning the slash of the longer-term growth target, investors should understand that some of the problems leading to this could be specific to the company while others could be industry-wide.

Company-specific challenges

Cisco Systems, Inc. (NASDAQ:CSCO) is facing growing competition from Chinese rivals. Its biggest headache is Huawei which is tightening its grip on the Chinese market and other emerging markets, thus locking CSCO out of these markets with cheap equipment.

The issue of U.S. alleged surveillance of foreign countries through Cisco technology is also denying the company business in markets such as Germany, China, and Brazil where it used to enjoy big sales previously.

Industry-specific challenges

There is slowdown in the networking industry generally and almost every player is going to feel the heat ahead. It happens that Cisco Systems, Inc. (NASDAQ:CSCO) experiences industry challenges ahead of peers by nearly two to three quarters, and this is why it is the first company to review its target and even issue warning over declining sales figures in the upcoming quarters.

The company hopes that if the U.S. market improves, that positive effect will be felt in other emerging markets and this will end the slowdown.

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