For those investors who are seeking both income and growth, the tech sector could offer a way to potentially achieve both. While some of the once-powerful names in the industry have cooled off a bit, shares could continue to move upward, while providing a steady dividend income stream along the way.
The key to success is networking
One tech giant that is currently offering its shareholders a healthy dividend yield is Cisco Systems, Inc. (NASDAQ:CSCO). This company sells, designs, and manufactures internet protocol-based networking, as well as other related products. These products provide connectivity to users of networks for video, voice, data, and mobile applications.
Recently, Cisco Systems, Inc. (NASDAQ:CSCO) acquired several companies, including BNI Video, ClearAccess, and Broad Hop — which have helped this large tech giant to increase both revenue and profits. And, as the demand for networking products will likely continue to increase, it is likely that Cisco’s profits will follow suit.
Recently, Cisco Systems, Inc. (NASDAQ:CSCO) also announced its intention to acquire Ubiquisys. This should help Cisco substantially increase its network management software capabilities — as well as to help the company in positioning itself better to mobile carriers.
In addition, Cisco’s taking over of Ubiquisys should also help the company satisfy the need of mobile carriers for more efficient networks. This can be beneficial as demand for data is rapidly increasing.
Overall, the number of Cisco Systems, Inc. (NASDAQ:CSCO)’s recent acquisitions tend to suggest that the company is placing a focus on software instead of hardware, as the hardware sector is facing more risk of commoditization over time.
Cisco Systems, Inc. (NASDAQ:CSCO) reported record revenue of around $12 billion for the second quarter of fiscal year 2013, which marks the eighth consecutive quarter of revenue growth for the company. With earnings per share of almost $2, along with a dividend yield of 3.3%, this company could offer investors both income and growth going forward.
Moving into new spaces
While the prospects are positive for Cisco Systems, Inc. (NASDAQ:CSCO), Oracle Corporation (NASDAQ:ORCL)‘s shares have actually been outpacing those of Cisco for several years. In the last one year, Oracle is up nearly 10%, and its shares are trading for less than 12 times the company’s forward annual earnings. However, this is just an average, as the company’s stock has been quite volatile. Larry Ellison, the company’s CEO, is well known for taking only $1 in annual salary last year, however, the leader of Oracle Corporation (NASDAQ:ORCL) also holds more than 1 billion of the company’s shares.
Oracle, with nearly $40 billion in annual sales last year, is considered to be a dominant force in the software business. Earlier this year, the company completed its acquisition of Acme Packet, a technology developer, in order to help expand Oracle Corporation (NASDAQ:ORCL)’s reach in the transmission of data across the Internet.
Recently, Oracle has also been expanding its footprint into software defined networking. This technology is replacing specialized network hardware with software that is housed in the central commodity systems.
Oracle has been purchasing companies that both build software as well as hold patents that are necessary to the way in which both mobile and fixed networks currently run. These acquisitions could pay off nicely through clients who are still purchasing billions of dollars of this type of equipment every year
Though Oracle Corporation (NASDAQ:ORCL)’s sales are under intense pressure from fierce competition in the software arena, the company has a strong balance sheet with more than $15 billion in net cash, and a gross margin of more than 75%, way above its peers’ average of around 50%. If you want to invest in Oracle Corporation (NASDAQ:ORCL), now might be the right time as the shares trade at an attractive P/E multiple.
Has Intel bottomed out?
The once unstoppable Intel Corporation (NASDAQ:INTC) seems to be slowing down, although many analysts are not surprised with the company’s financial performance of late. Intel Corporation (NASDAQ:INTC) is considered to be the largest semiconductor manufacturer in the world, supplying more than 80% of the CPU chips that are utilized in PCs. The company also dominates in the sale of processors that are used in powering large data centers in the cloud computing arena.