Wednesday December 05, 2012
by John Persinos, contributing editor Investing Daily
Cisco Systems (CSCO) controls 64 percent of the global market for networking equipment, as well as 45 percent of the market for corporate security, making it the clear leader in both arenas.
And the rising incidence of hacking, cybercrime and industrial espionage is creating robust demand for corporate security.
This two-pronged dominance has helped Cisco more than hold its own, despite slumping technology demand because of weak economic conditions in the US and recessions in the troubled euro zone.
Proprietary information is a major competitive asset, but data security systems are riddled with vulnerabilities, especially as the workforce becomes more mobile and supply chains more global.
That’s where Cisco comes in. The company’s security innovations provide firewall, web, and email security and intrusion prevention, while also facilitating mobility and telework.
According to research firm IDC, the global network security market, racked up revenue of $8.16 billion in 2011, an increase of 8.1 percent from the previous year. This sector is on track for similar growth in 2012. As the networking and security leader, Cisco is reaping the spoils.
In November, Cisco reported first-quarter fiscal 2013 revenue of $11.9 billion, an increase of nearly 6 percent year over year that blew away analysts’ expectations of $11.7 billion.
Earnings rose 18 percent to $2.1 billion; earnings per share (EPS) came in at $0.48, a year-over-year increase of 12 percent. This latest quarter marks the fourth consecutive positive earnings report for the company. Analysts’ consensus calls for the company’s earnings to grow 32 percent and revenue 5.7 percent in 2013.
So far this year, Cisco had bought back 3.8 billion shares of stock at a cost of $76.4 billion, with $5.6 billion remaining in its current buyback plan. The company raised its dividend after last quarter from $.08 to $0.14 per quarter, for a current yield of 3.11 percent that’s only a 37 percent payout.
Cisco’s trailing P/E ratio of 12.1 and its price/earnings to growth ratio of 1.1 make the stock an enticing value proposition. As investors view the tumultuous markets with a wary eye, this technology stock provides both growth and safety.
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