Per CNBC which quoted The Information, Cisco Systems Inc. CSCO is planning to sell its newly developed standalone network operating system software called Lindt separately from its high-end devices.

The Information also noted that “Customers will be able to use Cisco’s cheaper switches that run on chips made by other companies, like Broadcom, rather than Cisco’s specially designed chips.”

Cisco’s share price dropped 0.18% in after hour trading on Mar 28.  We note that Cisco has outperformed the Zacks Computer Networks industry on a year-to-date basis. While the shares gained 12.6%, the industry witnessed an increase of 11.9%.

Switching: Cisco’s Largest Business

Cisco’s strategy of bundling software-hardware in switching business has been accretive to its top-line growth over the years. Switching, which contributed 39.6% of revenues in fiscal 2016, is its largest segment. However, revenue growth has been disappointing in the last couple of years as the company continued to lose market share.
 

Cisco Systems, Inc. Revenue (TTM)

Cisco Systems, Inc. Revenue (TTM) | Cisco Systems, Inc. Quote

Per CNBC, the recent move will help Cisco maintain its customer base against intensifying competition from the likes of Arista Networks ANET and Juniper Networks JNPR. However, increasing sales of the low-margin switches can hurt profitability going ahead.

Share Momentum to Continue

We believe that Cisco’s expanding footprint in the rapidly growing security and data center market is promising. The company’s expanding product portfolio thanks to Jasper and AppDynamics acquisitions is a key positive. (Read More: Cisco Expands Its IoT Offerings Thanks to Jasper)

Moreover, partnerships with the likes of Pure Storage, salesforce.com CRM and IBM will help Cisco to gain significant traction in the data center, cloud and Internet of Things (IoT) market in the long haul. (Read More: Cisco, IBM Expand VersaStack Offerings to Boost Performance)

Further, continued share buyback and dividend hikes are positives.

Currently, Cisco has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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Cisco Systems, Inc. (CSCO): Free Stock Analysis Report
 
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