Yahoo Finance Cisco Systems' Expansion Into Internet of Things Is a Promising Endeavor
- By Harsh Jain
It was a fruitful 2016 for Cisco Systems Inc. (CSCO). The stock was up over 25% from its 52-week low, but the company is off to an almost flat start this year. Cybersecurity threats as well as standardization issues are increasing at a rapid rate, accounting for the foremost hurdles to the evolution of connectivity.
Cisco is in a great position to benefit from these continuously rising cybersecurity threats and looks like a better option compared to most of its rivals. The company is offering more innovative and advanced intelligent automated solutions with industry-leading security, which further fortifies its position in the cybersecurity market.
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The intrinsic value of CSCO
In the prior quarter, revenue generated from the company's security segment surged 11%, resulting in the fourth successive quarter of double-digit growth. Furthermore, the company observed hasty adoption of its advanced threat solutions, with amp revenue increasing over 70% and recording more than 22,000 customers around the globe.
Apart from this, Cisco is aggressively focusing on the internet of things (IoT) market, which is projected to grow at a rapid pace over the next several years. It also presents a great opportunity for the company to efficiently deliver most of the connectivity as well as security needs introduced by internet of things.
According to a forecast report from IHS Markit, the IoT market is anticipated to reach 30.7 billion devices in 2020, almost doubling the 15.4 billion devices in 2016. The company is on its way to introducing tools, applications and programming interfaces to overcome several standardization issues and security threats that could cripple the evolution of the technology.
On the other hand, Cisco is approaching well established and big players to strengthen its presence in the IoT market. It acquired IoT service platform Jasper Technologies in 2015.
The company is combining the IoT services with its switches, routers and unified computing systems (UCS) servers, which certainly helps provide tough competition for its rivals in numerous markets.
Moving ahead, the company partnered with Intel Corp. (INTC), LM Ericsson Telephone Co. (ERIC) and Verizon Communications Inc. (VZ) to develop a 5G mobile router. As an outcome, Cisco could benefit from the demand for switches and routers designed specifically to fulfil consumers' IoT requirements.
Summing up
While several cybersecurity players are still struggling to find their way into the green, Cisco performed amazingly well in 2016. In comparison, cybersecurity rivals FireEye (FEYE) and Palo Alto Networks (PANW) were down 42% and 29% last year.
Cisco currently trades at a price-earnings (P/E) ratio of 14, which is considerably lower than the industry's average. Moreover, the company offers a forward dividend yield of 3.47%, making it a great investment option at present levels.
Disclosure: No position in the stocks mentioned in this article.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 5 Warning Sign with CSCO. Click here to check it out.
The intrinsic value of CSCO
