Cisco: I Am Bullish, Are You?
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Cisco Systems (NASDAQ: CSCO) is considered to be a global leader in networking. They have changed how people communicate, connect and work together. Their fourth quarter net sales were $11.7 billion with a net income of $1.9 billion or $0.36 / share on a GAAP (generally accepted accounting principles) basis & net income of $ 2.5 billion or $0.47 / share on a non –GAAP basis.
*Source : Quarterly Financial Report Cisco
We see that their revenues and profits were higher than expected and so the investors were keen on the dividend they would receive. Cisco had declared a 75% increase in the quarterly dividend from $0.08 to $0.14. Their next dividend report is expected to be declared by November 13.
A 6.2% growth rate is expected in the fiscal revenues ending July’13 and a growth of another 5.9% in the subsequent financial year. They are buying back shares worth billions, with the figures of $4.4 billion in the year 2012. They are also planning to buyback shares worth $5.9 billion in the near future. At this point, they represent 6% of the present market cap, which stands just below $100 billion.
Where do they stand currently?
We see, they are buying-back shares, are paying handsome dividends and they have shown good revenue growth, thus the stock is considered a value play at the moment. Cisco has joined hands with Citrix Systems (NASDAQ: CTXS) to launch a new partner accelerator program, that allows the two enterprises to build channel partner competencies, abridge market activities, elevate partner discrimination, and oblige partner profitability.
Cisco also has acquired the privately owned ClearAccess, that provides software to service providers for the rovisioning and management of residential and mobile devices. This acquisition of ClearAccess will aid Cisco to manage, deliver better and monetize their services, while helping to develop and enhance customer experiences and operational efficiencies.
Along with it Cisco also acquired another privately owned Truviso. This helps Cisco to reinforce its devotion towards intelligent networking by providing separate solutions with tributary real-time analytics for the core, virtualization, data center, collaboration, and video.
50 percent of the cash-flow, as promised by Cisco, would be returned to the shareholders. Thus it makes me believe that in another 12-15 months they should be announcing their new buy-back program. In the past, investors have been skeptical about this program by Cisco. However if we combine it with its current dividend of almost 3 percent, it surely adds a lot of value to its current program.
Following is a graphical comparison between Cisco, Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT) depicting the forecasted revenues and earnings. Cisco's current fiscal year ends in July’13, Intel in December’12 & Microsoft's in June’13. The P/E values are based on those yearly estimates.
*X-Axis: Company
*Y-Axis: P/E ratio
Intel suffered a huge revenue dip. Despite the fact that the forecasted revenue is better than the current, I would not consider being bullish on Intel solely on this basis. This is because the expected growth figures are not that lucrative. Microsoft is expected to have a decent growth in its revenue and is also offering some extra dividend as compared to Intel and Cisco. Among the three Cisco has the second highest growth which can attract investors. However, Cisco's returns are expected to grow at 12.4% in the next year, while the EPS (earnings per share) at 13.5%. The increment in dividend, the ongoing buy-back program and an expected growth in revenue can help Cisco in catching the eyes of an investor.
Interested in Learning More?
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