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Cisco Systems, Inc. (CSCO) Is the Best Pick in the Networking Sector

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The technology sector has seen a lot of changes in the past five years, characterized by an era of cloud computing, virtualization, and smartphones. Cloud computing is among the fastest growing segments in the industry. At the moment, networking equipment manufacturers are trying to expand into the cloud and their focus has turned to software from hardware.

Cisco Systems, Inc. (NASDAQ:CSCO), in my opinion, is ideally positioned to capitalize on the changing trends despite stiff competition from Juniper Networks, Inc. (NYSE:JNPR) and Alcatel Lucent SA (ADR) (NYSE:ALU).

Cisco Systems, Inc. (NASDAQ:CSCO)Why Cisco?

Cisco Systems, Inc. (NASDAQ:CSCO) has witnessed some extremely impressive growth figures during the last year — wireless revenue grew 27%, switching declined 2%, routing and data center went up 77%, and collaboration and security went down 5%. All in all, Cisco performed above industry averages, delivering value to its shareholders in an environment of cut backs.

Cisco Systems, Inc. (NASDAQ:CSCO) is expanding and has geographical presence in high growth areas such as the emerging markets and the U.S. Its global investment portfolio is worth $2 billion and the business model is heavily inclined towards acquisitions as the company adjusts the portfolio to the changing market trends. Cisco recently acquired JouleX, a software designed to help companies manage energy usage. Earlier, it acquired a U.K.-based networking company known as Ubiquisys for $310 million. Ubiquisys’ acquisition will help the company manage its mobile data networks well, which is one of the most rapidly growing segments in the sector.

One of the biggest challenges faced by the industry is the prevalence of malware and cyber security threats. Management has high hopes from its recent launch of Cisco Systems, Inc. (NASDAQ:CSCO) Platform Exchange Grid (pxGrid), with its architectural framework to combat security threats. Furthermore, a consistent stream of revenue can be expected from its recent acquisition of Sourcefire, an internet firewall company.

Other stocks to watch out for

Other major players in the networking equipment manufacturing industry are Juniper Networks, Inc. (NYSE:JNPR) and Alcatel Lucent SA (ADR) (NYSE:ALU). Juniper has its operations diversified across wireless, routing, and switching and data center and cable content segments. It competes directly with Cisco Systems, Inc. (NASDAQ:CSCO)on geographical and operational lines. The business heavily invests in product innovation.

Juniper Networks, Inc. (NYSE:JNPR) has undertaken a similar move to capitalize on the security challenges faced by the IT industry. Its strong presence in the Indian market should prove to be a growth driver. The company recently signed a partnership with the Muthoot Group in developing a customized banking application for its customers. Juniper designed its first web intrusion system by the name of Junos WebApp Secure to protect websites from intrusion.

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