Cramer: Cisco's latest quarter proves shift to software is working

Key Points
  • Shares of Cisco rose more than 6 percent after the company reported its fourth quarter results last week.
  • CNBC's Jim Cramer gave all the credit to CEO Chuck Robbins, who is leading the charge to shift from hardware to software-based networking and has aggressively used the company's cash for acquisitions and buybacks.
  • "We've been waiting for Cisco to finally give us the kind of truly great quarter that would prove Robbins' plan is working, and I think this was it," the Mad Money host said. 
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Shift to software is working for Cisco

Cisco's transformation from a networking hardware company into a diversified business with lots of exposure to software is finally starting to pay off, according to CNBC's Jim Cramer.

Last Wednesday, the company reported earnings of 70 cents per share, excluding certain items, up a penny from analysts' estimates of 69 cents per share. It also beat top line expectations, reporting $12.84 in revenue versus the $12.77 billion that Wall Street estimated. Shares rose more than 6 percent on the fourth quarter results.

The Mad Money host gave all the credit to CEO Chuck Robbins, who is leading the charge to shift from hardware to software-based networking and has aggressively used the company's cash for acquisitions and buybacks.

Under Robbins' leadership, Cisco has snapped up companies like Jasper Technologies, an internet of things platform; Duo Security, an cyber security firm; and Broadsoft, a cloud calling and contact center provider.

"We've been waiting for Cisco to finally give us the kind of truly great quarter that would prove Robbins' plan is working, and I think this was it," Cramer said.

According to Cramer, investors should be watching the business transition highlights, which should indicate how the company's switch to software is working out. This quarter, subscriptions made up more than half of Cisco's software revenue, and deferred revenue from recurring software and subscriptions increased by 23 percent compared to last year.

The stock price is now only a few dimes away from hitting its 52-week high of $46.43.

Prior to the company's latest quarterly report, its stock had been faltering. The White House's ban on component sales to the Chinese telecommunications firm ZTE hurt companies like Cisco. Cisco, which gets almost half of its business from overseas, was already down as a result of the trade conflict. The stock declined further after the market disliked its third quarter results.

The San Jose-based company used those declines to buy back about 3 percent of its shares, spending $6 billion on the repurchase.

WATCH: Cramer explains why Robbins' strategy for Cisco is paying off

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Cramer: Cisco's latest quarter proves shift to software is working

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