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Cisco Systems (NASDAQ:CSCO) has been the champion of computer networking, even though the stock have been volatile throughout 2013. The company has been in turnaround mode but moves by CEO John Chambers have done little to excite investors in recent years. Cisco has sold off Linksys, acquired Sourcefire and has cut its workforce by 12,000, but these strategies have been offset by a revised weak guidance and an uncertain future in global markets.

Increasing Revenue, Lower Forecast

The company's 2013 Q3 report (its fiscal Q1) saw revenue grow to $12.1 billion, a year over year increase of 2 percent. But guidance was lowered to a 10 percent revenue decline, which sent investors heading for the exits following the report. The vast majority of the company's revenue is from products, which inched up 1.1 percent while services grew at 4.2 percent year over year. Revenue in China fell as the company is under pressure from the U.S. government surveillance spy scandal that has caused the Chinese government to rethink its business with American tech companies that build its technology infrastructure.

One the bright side, sales were up slightly in North and South America for a four percent increase. But global sales were less encouraging as revenue fell in Mexico, India and China, each by 18 percent. Even worse, revenue in Brazil was down 25 percent while revenue in Russia dropped 30 percent. More uneasy news in the report was that operating expenses grew 7.9 percent to $5 billion from the same quarter the previous year due to increased research and development costs. Net income was down from $2.1 billion to $2.0 billion. In an attempt to refocus investor attention on the stock, Cisco said it will boost its stock repurchasing by an additional $15 billion after buying back $2 billion worth of shares in the quarter. The company also issued a 2.9 percent dividend valued at $914 million.

New Enterprise Solutions

The reason Cisco isn't really that much of a risk is because it's a company that continues to help other companies find efficient solutions. That's one of the most important qualities for any company in the new economy. The company announced in November 2013 that its EnergyWise Suite helps businesses reduce energy costs and carbon emissions for connected devices. This development is a result of Cisco's recent acquisition of JouleX software, which integrates with its existing solutions.

EnergyWise makes network systems more energy efficient because of its monitoring, measuring and energy management capabilities. The service affects switches, routers, servers and access points as well as IP phones, laptops and monitors. It can even help make ATM machines achieve more energy efficiency. This development is revolutionary since IT energy accounts for up to 80 percent of energy consumed by an enterprise. Almost every business wants to lower these costs, not to mention growing concerns about environmental safety, so it may help make up for lost global revenue.

Conclusion

Cisco's fundamentals are actually strong, despite falling global revenue. Both revenue and net income were up the past year with increasing assets from $92.6 billion to $100.7 billion while liabilities only increased slightly from $39.9 billion to $41.8 billion. The stock has stayed on a steady path over a long time frame despite not being able to bust out of the $15 to $30 range it's been stuck in the past decade. During 2013 CSCO has traded between $18 to $26 and following its November 14 report fell 11 percent to $21 due mainly to disappointing guidance. Based on the stock's overall stability and the fact it's only trading around 11 times earnings, Cisco appears to be a safe investment as long as its products have high demand in the United States.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Cisco Still Has Life Despite Falling Global Revenue