Tags: Cisco | CSCO | technology | IT

Cisco’s Potential for Upside Grows

By    |   Friday, 26 Aug 2011 09:36 AM

In a world where investing tends to focus on tech IPO booms and busts, Cisco Systems (CSCO) finds itself trying to be more long-term than those short-lived prom queens, yet more exciting than IT mainstays such as Hewlett-Packard (HPQ) and IBM (IBM).

Cutting $1 billion dollars during the next fiscal year is exactly how to do that. End-of-year reporting in early August showed the company with more revenue growth and higher-than-expected earnings per share, with growth ranging from 9 percent to 19 percent in its four key regions.

Yet Cisco faces dwindling public spending. The company relies on government for about a fifth of its revenue, which fell by 4 percent during the recent quarter. An announcement by the province of Ontario has investment there of $455 million over five years in R&D while boosting services for the province, but more deals will be needed to make up for the gap.

The company recently exited its smart grid software business, something that will help it reach its $1 billion fat-shedding goal while also helping it to consolidate and move away from public spending exposure. Utilities and power consumers don’t yet seem ready to dive into smart grid, so instead Cisco will use its world-leading networking technology for machine-to-machine ISPs in private sector settings.

Connecting machines

This concept of the “Internet of things,” to connects machines to other machines, saw a major boost recently with the introduction of a new product, the Cisco 819 Integrated Services Router (ISR) Machine-to-Machine Gateway. The new ISR help improve mobile and rural healthcare provision — a key component for the Ontario deal — and allow vending machines to "find" and "talk" to the nearest replenishing depot/vehicle so machines are refilled before popular products run out.

Just prior to the full-year reporting, analysts were unsure about the company’s direction. Citi cut its $20 target to $17.50 while remaining with its hold recommendation. Yet Goldman Sachs is taking a bullish position, looking at $21.

After losing 22 percent of its value during the 2011 fiscal year, Cisco trades in a $15 to $16 range. The company next reports in early November.

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In a world where investing tends to focus on tech IPO booms and busts, Cisco Systems (CSCO) finds itself trying to be more long-term than those short-lived prom queens, yet more exciting than IT mainstays such as Hewlett-Packard (HPQ) and IBM (IBM). Cutting $1 billion...
Cisco,CSCO,technology,IT
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2011-36-26
Friday, 26 Aug 2011 09:36 AM
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