Tags: Cisco | road | recovery | CSCO

Cisco Stock On the Road to Recovery

Wednesday, 11 Jan 2012 07:04 AM

By Dan Weil

Cisco (CSCO), the world’s largest maker of networking equipment, is traveling the road to recovery after stumbling for months. The company had a bloated payroll, bloated expenses, and a sclerotic decision-making process. It also drifted from its core expertise, as evidenced by its failed Flip video-camera business.

But Cisco is making progress on these issues. Switches and routers, which carry data across networks, generate almost two-thirds of Cisco's revenue. The company is returning its focus to these products. In July, Cisco announced that it’s dumping 6,500 workers. It also is cutting costs and streamlining management.

Demand for cloud computing is helping to boost Cisco’s data-center switching business. That’s a market the company dominates.

Cisco's has held more than 60 percent of the switch market for the past five years, according to Morningstar. Competition in that segment from HP (HPQ), Juniper (JNPR), and Brocade (BRCD) has had little impact. It’s tricky for customer to change providers, and Cisco devotes great energy to product development and customer support.

Routers are used by phone service and cable service providers to move data across long distances. In that market, Cisco and Juniper basically have a duopoly. Cisco is well set for years of dominance.

Mixed review

The company registered net income of $1.8 billion in the quarter ended Oct. 29, down 8 percent from $1.9 billion a year earlier. Revenue gained 5 percent to $11.3 billion.

Standard & Poor’s analyst James Moorman has a hold rating on Cisco shares. “While we see CSCO benefiting from a rapid rise in bandwidth usage, we expect product transition issues, public spending weakness, and pricing pressure to persist for the next several quarters,” he writes.

“Although the stock is trading well below peers on a P/E (price-earnings) and price-to-EBITDA basis, we think valuation multiples will remain depressed until CSCO proves it can maintain gross margins despite slowing revenue and a competitive environment.”

The company next reports earnings Feb. 8.

© 2015 Moneynews. All rights reserved.

Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
Zip Code:
Privacy: We never share your email.
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Scott Walker Sets Up Fundraising Committee and Groundwork for a Run

Tuesday, 27 Jan 2015 18:14 PM

Wisconsin's Republican Gov. Scott Walker isn't wasting any time - with a new website that just went online today, and a  . . .

Obama Surrenders on College Savings Tax Proposal

Tuesday, 27 Jan 2015 17:53 PM

The White House said Tuesday it is dropping a proposal to scale back the tax benefits of college savings plans amid a ba . . .

ABC News: Why Is Hillary Missing in Action?

Tuesday, 27 Jan 2015 17:48 PM

Former secretary of State Hillary Clinton has made very few public appearances, especially compared with last year, but  . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
©  Newsmax Media, Inc.
All Rights Reserved