Cisco (CSCO), Intel (INTC), IBM (IBM): Finding Value in Unsexy Tech Names

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While investors get caught up in the hype of new technology products and services, some of the other tech companies are often left out in the cold as the masses flock to buy the next growth name. The old tech giants that are sometimes forgotten due to the inordinate amount of coverage that more ‘sexy’ and exciting tech names such as Facebook, Apple, and Groupon, include deep value picks Cisco Systems, Inc. (NASDAQ:CSCO) and Intel Corporation (NASDAQ:INTC). These and other ‘unsexy’ tech names operate much of the behind-the-scenes technology that powers company infrastructure and technology devices, from enterprise software/hardware to networking and communication products. Each also has a market cap at or above the $100 billion mark, making them true tech giants.

RENAISSANCE TECHNOLOGIES

Cisco expects to continue to see solid growth in fiscal year 2013 with revenues expected to be up 6.5%, then up 6.7% in 2014. This includes product demand increases for data centers and communication software. Cisco is gaining share in routing and also driving customer acquisition with strides in offering system wide solutions in the enterprise networking arena. What is expected to help drive Cisco’s long-term growth is a continual rise in bandwidth usage, which is a product of rising populations and prospering nations. Cisco saw billionaire Jim Simons betting on the tech company in 3Q, with a new position of over 13 million shares (check out Jim Simons’ new picks here).

Intel is a global chipmaker that has seen weakness in its shares – down 15% year to date – on uncertain PC demand. The likes of tablets and smartphones have been slowly eating into the market share for conventional PCs and revenues are expected to come in relatively flat for 2012. Slowing PC demand will in part be countered by data center growth, but the outlook for Intel remains bleak, with expected 2013 sales to come in at only 1.3% higher than 2012.

Oracle Corporation (NASDAQ:ORCL) is another less sexy tech name that offers enterprise software and hardware products. Oracle expects modest growth for fiscal 2013 of only 3%, but its product diversity has allowed the company to perform well on a stock basis with its share price up 25% year to date. Oracle has a solid growth avenue in software licenses, with the segment expected to be up 5% in 2013, but also has the opportunity of  better hardware market penetration with the full integration of its Sun Microsystems’ acquisition. The recent acquisitions – totaling $3.5 billion so far this year – in the cloud computing space will be a fundamental driver of the long-term growth for Oracle.

International Business Machines Corp. (NYSE:IBM) is quite the diversified IT company with five different segments. Even with the breadth of service offerings, IBM is expected to post sales down 2.5% in 2012, but growth in emerging markets should put IBM to a 2.5% sales growth in 2013. This less-than-stellar revenue growth makes IBM a questionable growth investment, but its solid balance sheet and ability to generate cash flow is a reason Warren Buffett loves the company. IBM continues to be one of billionaire Warren Buffett’s favorite stock picks – with Berkshire having nearly 20% of its 13F invested in the tech company (see Warren Buffett’s latest picks).

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