Hi Despacio -
Cisco is mildly interesting, with somewhat balanced pros and cons -
Pros -
Communication market continues to grow, CSCO orders and profits are up.
Many of their competitiors have dropped out or cut back, exceptions being Juniper and HuaWei.
Corporations have lots of money to spend. Govenrments are continuing to spend money on IT, especially the internet side.
Many Corporations that run thier own datacenters have developed a strong preference for dealing wiht ONE internet equipmnet supplier - and that supplier is Cisco, who can provide almost every thing.
Cisco has large and growing non-US sales, if the USD Dollar drops, sales numbers will look larger.
CSCO has $2.00 cash and a P/e of 22, and growth. Minus the cash, the P/E is about 20.
That is not excessively high for a tech stock
Cons -
There is a serious competitor in China's HuaWei
The move towards outsourcing datacenters and web service to organizations like IBM, EDS, HP, Xerox, etc. means those companies have more leverage over CSCOs prices, and can mix and match vendors and make the totality work in a cost effective manner. So there is a trend to deal with fewer equipment vendors, which favors Cisco, but when Corporations go even further, and want to get out of doing their own IT stuff, they contract the service out to someone like EDS, and EDS can be a much tougher customer for Cisco.
CSCO has 6 Billion shares out - who needs to buy it, who will bid it up ? Will the market support a higher valuation ?
Europe or the US government might want to attack Cisco on anti-trust issues.
A 22 p/e is about the middle range for tech stock p/e, outside of the bubble years, so CSCO is not a bargain, unless you assume the revenue growth rate will increase or at least stay about the same.
****For a technical analysis view, ask dabum on this thread -
Subject 55245
My view is there are more compelling large stocks, where the Pros are much stronger than the cons - Genentech DNA, Chesapeake CHK, Areva (French Nuclear power company), etc.
In technology, there is one compnay that has just built 2 more very profitable businesses - and that's Apple, APPL. There is great potential with the Video ipods, and also with Intel chips in Mac inproving cost performance, maybe becoming a game platform.
Cisco is a great company.
They have effectively WON.
Their 124 Billion USD market cap reflects this.
Having WON, to a large degree the game is over.
If you can consider some of the middle and smaller size stocks, I think the prospects are much brighter.
If there is a swing toward large caps doing better than small and mid-size stocks, Cisco might be a very good place to go. |
