Seidman Investment Portfolio Organization

 

Company: Cisco Systems Inc.
 
Sector: Technology (NASDAQ:CSCO)

Buy Summary:

Strengths: 

  • Significant scale advantage and hefty customer switching costs give Cisco a wide economic moat.
  • IT managers loath switching vendors risking network disruptions adding to Cisco's moat. 
  • Cisco has used its corporate data networking dominance to move into new markets such as network security, video conferencing, and home networking.
  • 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. 
  • Cisco has a significant cash on hand for making purchases and acquisitions in the coming years. 
  • CEO John Chambers holds 23 million options and shares aligning his interest with the investor well. 

Weaknesses:

  • Cisco has been aggressively pursuing the mature server market which offers little return as profit margins are thin. 
  • The firms hunger for growth may lead it to make ill advised purchases of patents, companies, or investments. 
  • Increased competition from competitors in low cost manufacturing regions could put downward pressure on profit margins. 

Key Financials:

  • Dividend 1.5%
  • Cisco P/E 17.90  S&P 17.40  Industry 20.70
  • Gross Margin 15.02%
  • Operating Margin 20.04%
  • Total Current Assets $57,231 Mil. 
  • Total Current Liabilities $17,506 Mil.

Recommendation: HOLD 

Updated: 9-28-2011

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Page last modified March 11, 2012