5 Networking Equipment Companies to Watch
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Since you're reading this, it's impossible to deny that networking has changed the world forever. A lot of the tech press seems to focus on the latest Internet startups, but the Atlases of the tech world are the hardware companies, and network hardware manufacturers are the ones we might take for granted the most.
Cisco (NASDAQ: CSCO) has achieved a level of ubiquity that's usually reserved for the likes of Microsoft and Intel. It's almost certain that the words reaching your screen crossed a Cisco router at some point. The company just released its latest 10-K a few days ago. It had earnings of $8.0 billion with $0.36 per diluted share, mostly from its trademark routers. (Though the alleged strong-arming tactics probably didn't hurt.) Switching equipment accounted for $14.5 billion of the company's $36.3 billion in sales last year, or 40 percent of the company's sales.
Juniper Networks (NYSE: JNPR) is another major seller of Internet infrastructure. Its revenues dipped by 20 percent to $621.22 million in 2011 from $778.15 in 2010, but sales increased by 8 percent. The company had a healthy free cash flow that year as well. Juniper is benefiting from a Cisco product line that's become a bit bloated and confused. Attempting to sell routers to home users doesn't seem to be working as well as it does selling high-end routers to businesses, largely because they can't call up people's bosses who decide not to buy one and yell at them that they're jeopardizing their future. Juniper, on the other hand, focuses on routers and other equipment for enterprise.
Other than its networking infrastructure products, the company has also branched out into telepresence, videoconferencing intended to make it look as if the other person is actually there. Collaboration tools account for 11 percent of the company's sales.
Another leader in networking is Broadcom (NASDAQ: BRCM). Like Cisco, the company is ubiquitous in networking, but instead of selling to IT departments and telecom carriers, this company focuses on products for wireless and wireless broadband, including things like DSL modems and set-top boxes, as well as Wi-Fi adapters. The company posted a profit of $927 million last year, with sales of $7.3 billion.
Yet another company that's overlooked is Qualcomm (NASDAQ: QCOM). Among other things, they make a lot of wireless networking cards. You probably have one of their Atheros devices slurping the bits of this page from a nearby Wi-Fi router over the either to your laptop. The company also sells a lot of other mobile communications equipment, including CMDA, 3G, and 4G LTE infrastructure. The move to 3G and 4G has been good to Qualcomm. The company posted a profit last year of $4.2 billion last fiscal year, or $2.57 per share. The company is also fabless, which means it farms out the actual manufacturing of the chips to third parties to keep the overhead down. It also has a P/E ratio of 19.20, which is a bargain for tech companies.
If one company should know telecommunications and networking, it should be Alcatel-Lucent (NYSE: ALU). The company merger of the French company Alcatel and Lucent, formerly Bell Labs, whose innovations, including information theory, fiber optics, UNIX and others are responsible for the modern telecom environment we're living in. This company, which makes myriad telecom products, hasn't always lived up to its potential. It posted losses for three straight years since 2008, but it managed to dig itself out of the hole in 2011, posted a profit of $1.4 billion in 2011. With a management shake-up intended to streamline the company, it looks poised to do even greater things.
Even if the fortunes of companies based on the Internet wax and wane, the companies that actually make the stuff that make the Internet work will never go out of style.
Fool blogger David Delony has no positions in the stocks mentioned above. The Motley Fool owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
