JMP Group: Encouraged By Cisco's Earnings, But Where The Company Goes From Here 'Is More Critical'

Cisco Systems, Inc. CSCO reported better than expected numbers on Wednesday for the first quarterly earnings under the leadership of its new CEO, Chuck Robbins.

Erik Suppiger, JMP Group senior analyst, was on CNBC recently to weigh in on the company's earnings.

In Midst Of A Major Transition

"I was encouraged with the results," Suppiger began. "But, I really think the more critical aspect is the outlook. Cisco is really in the midst of a major transition, reorganization from the top down. And certainly that's going to be where my focus and, I think, a lot of investors are going to be more interested going forward here."

Deferred Revenue And Increase In Expense

Suppiger was asked for his views on Cisco reporting an increase in deferred revenue, decline in gross margin quarter-over-quarter and increase in its operating expenses due to fresh hiring in the second-quarter. He replied, "I do think you have a significant structural change going on, organizational change. So the near term earnings that they had, the $0.59 the upside there that could certainly have been some of the headcount transition that they got and now they got to bring on some expenses."

"So, I think, they are in a mode where they are probably investing from here and that's probably why the outlook is pretty consistent with the consensus going forward. In terms of the deferred revenue, I do look at that positively because the company has traditionally been very much hardware-centric and, I think, they are trying to migrate to more of a software sale, more of a subscription sale and increased differed balances certainly indicative of some success on that front," Suppiger concluded.

At the time of this writing, Cisco shares were trading up 3.87 percent.