Cisco (CSCO) publishes its latest results on Wednesday and should be the subject of careful follow-up.

In 2018, the network giant showed some resilience, while other technology stocks weakened in the face of commercial difficulties and general market worries. Wall Street is mostly positive on the headline in earnings, with analysts expecting earnings per share of $ 0.72 for the quarter, according to Factset.

Cisco shares fell 1% in pre-market trading on Tuesday as analysts at Morgan Stanley downgraded the overweight position due to health concerns in its network security business. The Cisco stock has increased by about 10% so far this year.

"I'm interested in revenue forecasts and the number of software subscriptions that account for total software sales," said Jeff Marks, portfolio analyst for Action Alerts Plus by Jim Cramer, owner of Cisco. "We will also monitor gross margins and the impact of pricing DRAMs, which are expected to move from wind to tailwind during the second half of the fiscal year of Cisco."

Here are some other key issues to watch out for when Cisco releases its fiscal second quarter results on Wednesday after closing.

1. Challenges and opportunities of China

Trade tensions and the threat of rising tariffs have not been favorable for many US companies, but Cisco is uniquely positioned in relation to China, JP Morgan analysts wrote in early January. The growing concern about Huawei's product security could drive up Cisco sales, given the competition between the two for network products. These victories could reside on the European and Asian markets, where Huawei is more present in the United States.

When Cisco reports on its latest results, investors will be invited to provide more information on how such complexities could affect Cisco's revenues. Cowen's Paul Silverstein wrote Monday in a note that, while trade tensions may be a risk for Cisco's stock, its performance in the face of macroeconomic challenges bodes well for the growth of its business this year: "We expect the growth of Cisco's improved competitive position and its strong performance against what appears to be a slowing or challenging macroeconomic environment in regions outside the US," he said. written.

2. Assessment of the impact of mergers and acquisitions

Cisco CEO Chuck Robbins drove the Cisco acquisition to a break-up in 2018, separating Duo Security, July Systems, Accompany and Skyport Systems throughout last year. However, it is unclear to what extent some of these acquisitions have spurred growth in Cisco's subscription and cloud business, and how "organic" this growth is, Needham's Alex Henderson said on Monday. "We believe that the combined benefits of acquisitions should significantly strengthen the security, software and cloud sectors as well as business / commercial growth rates," Henderson said, noting that Cisco had not informed investors the magnitude of growth related to acquisitions.

It could also leave investors guessing as more deals are made. In February, Cisco also finalized the $ 660 million purchase of Luxtera, a semiconductor company specializing in silicon photonics, which would bring important technology internally. Henderson added: "This could also improve the forecast for the April quarter, which is probably positive because it allows the company to go from 100G to 400G and add $ 100 million to the figure. d & # 39; business. " Nevertheless, investors may seem more detailed on the part of Cisco about the importance of its acquisitions in the overall picture of revenues.

3. Orientation a potential risk

Cisco, now 34, has made a gradual transition from its roots in network hardware to a more diversified, software-oriented enterprise. As indicated by AAP brands, subscriptions are a critical parameter to watch for given their relative predictability as a source of revenue – but investors can look for greater transparency regarding Cisco's software performance. in its forecast for the third quarter.

Other network providers have reported weaknesses in the "service provider" segments, wrote James Fish of PiperJaffray in a note last week, which could prove negative for Cisco's prospects, given its exposure to revenues of about 23% in the region. In its November 2018 report, Cisco also showed some weakness in this segment.

"Investors have been much more skeptical in the last few weeks about the software transition because fewer details have been provided by the company," Fish wrote. "We have reservations about Cisco's actions in printing given the potential lack of guidance."

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