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Company: Cisco Systems Inc. |
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Sector: Technology (NASDAQ:CSCO)
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Buy Summary:
Strengths:
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Significant scale advantage and hefty customer switching costs give Cisco a wide economic moat.
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IT managers loath switching vendors risking network disruptions adding to Cisco's moat.
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Cisco has used its corporate data networking dominance to move into new markets such as network security, video conferencing, and home networking.
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Gross margins have seen little erosion in recent months indicating the company is not being forced to discount its products and services in order to make sales.
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Cisco has a significant cash on hand for making purchases and acquisitions in the coming years.
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CEO John Chambers holds 23 million options and shares aligning his interest with the investor well.
Weaknesses:
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Cisco has been aggressively pursuing the mature server market which offers little return as profit margins are thin.
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The firms hunger for growth may lead it to make ill advised purchases of patents, companies, or investments.
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Increased competition from competitors in low cost manufacturing regions could put downward pressure on profit margins.
Key Financials:
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Dividend 1.5%
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Cisco P/E 17.90 S&P 17.40 Industry 20.70
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Gross Margin 15.02%
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Operating Margin 20.04%
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Total Current Assets $57,231 Mil.
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Total Current Liabilities $17,506 Mil.
Recommendation: HOLD
Updated: 9-28-2011
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Page last modified March 11, 2012
