Editor’s note: Driving adoption of next-generation products and aligning its resources, including layoffs, with high-growth segments will fuel Cisco’s long-term revenue growth, writes Technology Business Research Senior Analyst Scott Dennehy. Cisco operates its second largest corporate campus in Research Triangle Park, N.C.

HAMPTON, N.H. – Cisco’s (Nasdaq: CSCO) revenue is improving due to customer adoption of next-generation technologies.

Driven by improved revenue in Switching and NGN Routing and strong growth in Data Center and Security, Cisco’s total revenue was roughly flat year-to-year in 2Q14, declining just 0.5%. However, customer demand from service providers and in emerging markets remains sluggish, with total product orders down 11% and 9% year-to-year, respectively. These trends will continue for the next several quarters, and as a result Cisco’s revenue will be flat again in 3Q14.

Cisco is driving customer adoption of its next-generation, high-end switching and routing platforms successfully. The NCS and CRS-X, announced in 3Q13 and 2Q13, respectively, each generated $100 million in orders over the last year, with half of that total coming in 2Q14. The Nexus 9000, which is a key component of Cisco’s SDN strategy, had 580 customers as of 2Q14. TBR expects customer uptake of these platforms to continue to grow, which will help Cisco return to overall revenue growth by the end of 2014.

Workforce realignment will support Cisco’s investments in high-growth segments

Cisco remains focused on its long-term growth strategy, investing in high-growth areas such as cloud, security and SDN, even though the investments may not bear fruit in the short term. For example, the company added 2,000 employees to its Intercloud division over the past four quarters, but it will be several years before Intercloud contributes to Cisco’s revenue in a meaningful way.

To ensure the company can respond quickly to changes in the marketplace, Cisco will align its resources to capture growth opportunities in these emerging segments. This process will result in the occasional workforce realignment, such as the 6,000 employee restructuring initiative the company announced during its 2Q14 earnings call, which will enable Cisco to make decisions quicker and more effectively.

(C) Technology Business Research