Cloud Computing: Why Cisco Needs a Key Acquisition
October 30, 2012
Grazed from InsiderMonkey. Author: Marshall Hargrave.
Cisco Systems, Inc. (NASDAQ:CSCO) is a giant in the communications technology industry, with a market cap around $90 billion. However, this size has made it tough for the company to navigate the nimble cloud computing and wireless area network sector. The company grew EPS by only 5% annually for the last five years. As well, the company is expected to only see limited improvement over the next five years, with an 8% EPS annual growth rate, so is now a good time to buy Cisco?
Although the company made its largest acquisition in seven years earlier this year, we believe Cisco can make a bigger splash in the cloud computing area. Cisco has been in a heated battle with a number of smaller companies that have been attacking its communications equipment market share, namely in the cloud. We currently see little reason to invest in Cisco, even with a 3.2% dividend yield and a trailing P/E of 12x, given the other higher growth opportunities in the communication and wireless area network optimization space…
These opportunities include Juniper Networks, Inc. (NYSE:JNPR), Riverbed Technology, Inc. (NASDAQ:RVBD), F5 Networks, inc. (NASDAQ:FFIV) and Citrix Systems, Inc. (NASDAQ:CTXS).
Juniper has been reducing staff, as well as lowering 4Q guidance and lowering CapEx plans as a weak demand environment pose risks for the company. One bright spot is that Juniper and Riverbed recently partnered up to deliver better mobile applications in the WAN space. The deal allows Juniper to license Riverbed’s technology for improving network performance for applications across various devices. Cisco trails only Riverbed in WAN market share, after losing significant traction earlier this year. The two are the leaders in WAN, with the other three companies all having less than 10% of the market each…
Read more from the source @ http://www.insidermonkey.com/blog/why-cisco-csco-needs-a-key-acquisition-26355/