Cisco Systems Inc. - Stocks

CISCO
Min Spread *
80
Target Spread *
80
Leverage/Margin
1:5
Commission
0
Swap point Long/Short
-0.92 / -0.92
Nominal Value of one lot
100
Trading hours
16:30 - 23:00

Instrument description

Computing technology has touched and influenced every aspect of life, be it personal or professional. The most necessary element in the formation and growth of any business is the implementation of cost-effective hardware and software technological solutions. Cisco is an American technology giant that excels in designing, developing, and providing computer hardware and software that includes networking hardware, telecommunication equipment, software, and numerous other innovative products and services.

Cisco is a global leader in I.T related products, and it is located in San Jose and also the center of attraction in Silicon Valley that is regarded as the technological hub of the world. Cisco is the name of synonymous with transforming how people communicate and connect. Cisco shapes the future of the internet by designing and developing various network solutions, products, and services that play a pivotal role in the advancement of internet technology.

Cisco is not only located near to San Francisco, but it derives its name from the city, and the logo of Cisco symbolizes the iconic ‘Golden Gate Bridge.’ The goal of Cisco is to shape the future of the internet by offering quality and value to the customers, clients, investors, and its employees.

Cisco, along with its subsidiaries, Webex, OpenDNS, Jasper, and Jabber, strives to excel in the Internet of Things (IoT), networking systems, domain security, and energy management. Cisco has nearly 75,900 employees.

History of Cisco

Cisco is the world leader when it comes to computer networking products, services, and systems. Cisco was formed in 1984 by Sandra Lemer and Leonard Bosack and who both played a key role in connecting computers at Stanford. Both Bosack and Lemer introduced the Local Area Network (LAN) concept, which was the benchmark in connecting separate computers through a multi-protocol router system.

In 1986, Cisco made and started selling the first router that could effectively work on the (Transmission Control Protocol/Internet Protocol) settings. In 1988, a venture capitalist, Donald Valentine takes hold of the company, and John Morgridge is made CEO and president of the company.

Cisco goes public on February 16, 1990, with a market capitalization of $224 million, but Lemer is fired from the company, and Bosack leaves the company. Cisco in 1993, acquires Crescendo Communications. The revenues of the company exceed the $1 billion mark in 1994.

In 1995, John Chambers was named CEO, and Cisco buys StrataCom Inc. for almost $4.7 billion in 1996, a company that made switching equipment. The market capitalization of Cisco passed $100 billion in 1998 and showed the progress and success of the company.

The year 1999 was a year of acquisitions as Cisco bought 17 companies and some of the notable ones were

  • Cerent Corporation, that made fiber-optic network equipment for $7.2 billion
  • GeoTel Communications Corporation, which made software for routing telephone calls for $1.9 billion
  • Aironet Wireless Communications Inc. who developed wireless Local Area Network (LAN) devices for $800 million
  • Pirelli, an Italian company that made fiber optic telecommunication equipment for $2.2 billion

From the mid to late 1990s, the Internet Protocol (IP) gained massive success, and Cisco launched GSR (Gigabit Switch Router) routers and modern access shelves. The Dot-com boom further increased the importance of networking devices, and Cisco became the most valuable company in the world, with market capitalization reaching nearly $500 billion in 2000.

Cisco’s stock was listed in the Dow Jones Industrial Average on June 8, 2009. Cisco faced tough competition from domestic companies Juniper Networks and Alcatel-Lucent and international company Huawei and so posted lower than expected profit in 2011 that drove the company to cut 3000 jobs and reduce expenses by $1 billion.

On July 24, 2012, Cisco was permitted by the European Union (EU) to acquire NDS, a TV software developer for $5 billion. In 2013, Cisco also sold its Linksys division to Belkin International Inc., which also marked shift to B2B (Business to Business) strategy rather than B2C (Business to Consumer). On July 23. 2013, Cisco acquired SourceFire for $2.7 billion, and in August 2013, the company cut 4000 jobs.

As part of its restructuring plan, Cisco downsized nearly 6000 global employees in 2014 and later in the year announced an investment in Stratoscale. In November 2015, Cisco, along with other technology firms such as Dell, Microsoft, Intel, ARM Holdings, and Princeton University, agreed to work on fog computing and formed ‘OpenFog Consortium.’ In 2015, Cisco also sold its TV set-top box and cable business to Technicolor SA for $600 million.

In February 2017, Cisco launched the ‘Cisco Umbrella’ that is cloud-based secure internet gateway. At the end of 2017, Cisco’s price per share increased by 7%, and Earnings per Share (EPS) ratio also increased from 60 to 61 cents per share.

On May 1, 2018, Cisco acquired an artificial intelligence startup company called Accompany, for $270 million. In 2019, Cisco acquired Voicea, another artificial intelligence company, and CloudCherry, a customer service management company.

Current Business and Investment of Cisco

Cisco is mostly involved in developing multiple products and services of various aspects of the internet, such as networking, applications, security, and cloud computing. Cisco products and services are essential in every technological aspect of business, and so the business profile of Cisco is divided into three geographic segments that are

  1. Americas (North and South)
  2. Europe, Middle East, and Africa (EMEA Region)
  3. Asia Pacific, Japan, and China (APJC Region)

Cisco deals in a wide assortment of computing hardware and software solutions and in the following categories

  • Analytics and Automation Software
  • Infrastructure Software
  • Cloud and Systems Management
  • Application Networking Services
  • Wireless Equipment and Systems
  • Security
  • Switching devices, storage products, and network routing products
  • Technical support services

The product line of Cisco includes routers, switches, internet service devices, network and networking management software, protocol translators, and remote access devices that are all integrated to provide a seamless internet connection and communication for big corporations, government-managed companies, educational institutions, and other big organizations.

The Cisco products and services are also commonly used by internet service providers, telephone and cable companies, and other companies offering wireless communication. Cisco is focusing on developing innovative and advanced fiber optic networking and systems that can be effectively used for seamless voice and video communication.

The main division is the Infrastructure Platform, which consists of switching, routing, wireless, and data center products that function seamlessly to store and transport data. The Application segment manages the software related products and services that are used by data center platforms and networking products. The security division looks after the web security products and advanced threat security products. Cisco is a major provider of Voice over IP (VoIP) system, and Linksys worked with companies such as Skype, Yahoo, and Microsoft to integrate VoIP services with wireless telephones and other devices.

Risk and Potential in Cisco Environment

Cisco is a technology giant when it comes to I.T related products and services with a focus on networking, voice and video communication, cloud-based systems, and security systems. Cisco has progressed extensively with the advancement of technology, and the company acquired nearly 11 big and small companies in 2015 to diversify its portfolio of products and services.

Cisco has the biggest market share in the Ethernet switch market with nearly 60%, along with 56% market share in switches and router markets, 47.4% share in wireless LAN products, and 42.6% in Enterprise video conferencing equipment. The SWOT analysis is a fundamental tool for analyzing strategies and determining the current performance of the company and its future growth. The SWOT analysis of Cisco is given by

  • Strengths

Cisco’s main strength is its wide usability in network systems and ensuring seamless internet flow. The importance and value of Cisco products and services will remain as nearly every business requires setting up computer networks. Cisco supplies its products and services all across the world, and the company is known to develop advanced systems and services related to the field of Information Technology. With the increasing use of the internet, the value of Cisco will also increase as the company excels in switching, routing, cloud computing, and high-speed wireless internet connectivity.

  • Weaknesses

Cisco is known to deliver superior quality products to its clients and customers, but the company has faced numerous problems in effectively managing its supply chain. The components shortage has also led to a delay in shipping deliveries on time. Cisco also sees a decline in the storage networking market.

  • Opportunities

The field of computers and the internet is advancing at a rapid pace, and Cisco, with its ability and resources, has ample opportunity to expand its business and doing strategic mergers and partnerships. Cisco has the opportunity to grow in mobile broadband and Wi-Fi Home calling. Cisco also leads in cloud computing, and it is expected to account for 83% of total data center traffic and increase revenue and profits of Cisco. The cloud security is also progressing and said to touch $12 billion till 2022.

  • Threats

Cisco is constantly facing tough competition with rival domestic and international tech companies that includes Alcatel-Lucent, Arista Networks, Juniper Networks, Huawei, Microsoft, Motorola Solutions, LM Ericsson, and Polycom. The sales of routers and data centers are not consistent, and there is certain volatility.

Stock Analysis of Cisco

Cisco is listed and actively trades on the NASDAQ with the ticker symbol ‘CSCO.’ The company is listed under the ‘Technology Services’ Sector, and the industry is ‘Information Technology Services.’ Cisco is also an active member of other indices that include the S&P-500 Index, Russell-1000 Index, and Russell-1000 Growth Stock Index.

The all-time high share price of Cisco was $80.06 on March 27, 2000, and the average price in the last 52 weeks is $45.56.

Cisco Systems Inc. posted revenue of $51,904 million in 2019, along with the net income of $11,620 million, and the price of the share was $55.84. The total assets of the company in 2019 were $97,793 in 2020. Cisco acquired ThousandEyes in May for $1 billion, and this deal increased the chances for the company to add revenue from services and software. Cisco may promise attractive dividends to shareholders, but the buyback program has slowed down.

Cisco’s third-quarter, that of April 2020 has positive outlook and the company bought $981 million of its share, and previously in 2019, Cisco bought $6 billion of its shares. The revenue of the company fell to $12 billion, with 8%. The analysts predict a 10% fall in the July quarter due to the slowing down of business due to the Coronavirus pandemic. Before the Covid-19 outbreak, Cisco predicted that 30% of the revenue would be generated from the software.

The advancement of 5G technology can see the rise in the price of Cisco shares as the company provides access and aggregation routers along with 400G switching for data center and Wi-Fi6

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.

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