OK. That's a great analysis, but it misses my point of posting all this information. My main overriding premise is that bandwidth demand in all its guises also impacts Cisco's bottomline. So as bandwidth demand increases, so does demand for Cisco gear to enable carriers to supply the bandwidth product. Wireless demand in and of itself will actually benefit Nortel and Ericsson more than Cisco, because at the present time, they are better positioned to sell wireless gear. However, every wireless network will increase the load on the Internet as that traffic is carried across the networks that also provide bandwidth for the Internet. Therefore, as those networks get choked, the carriers will buy more networking gear to unchoke them. Much of that gear is Cisco gear. Therefore, you get the Cisco effect.
You can liken this effect to the multiplier effect. For instance, when the government spend money or lowers taxes, that increases the amount of money in the market that businesses and consumers can spend, which gets us into a virtuous cycle until inflation starts accelerating. The same is true here. The more ways that are found to tap the Internet (wireless and voice and video over IP), the more we see the multiplier effect occurring on bandwidth demand, which increases the demand for Cisco product, which benefits their bottomline and their stock, which makes me richer.
I wish I could quantify this multiplier effect, but that would take alot of research. Instead, I look for Cisco to be in the hottest demand areas of the gear used to supply this bandwidth. Then I look for their market share to be number 1 or 2. If Cisco seems to be lagging behind in a hot area, I get worried (like I was for awhile in the high end router market). When they close the gap, I get less worried. So far, I have been on the less worried side for 4 years now. This stock price bloodbath has been worrisome to say the least, but it doesn't change the fundamental picture of the long term massive need for bandwidth and Cisco's participation in that need. If you need another parallel, look at Intel and Microsoft. They were needed to supply PCs to the market. The time to have started worrying about your investment in those companies was not when we had various market downturns, but when the PC industry became mature. Likewise with Cisco. The time to worry about your investment in Cisco will be when bandwidth needs have leveled off (which I submit will be a very long time from now) and/or Cisco no longer can keep up with the latest products to supply those bandwidth needs. Neither of those is the case, so I'm secure in my investment. |
