Going Beyond Earnings in Tech: Cisco Systems, Inc. (CSCO), Google Inc (GOOG)

This puts Cisco in a great position to generate strong profits for many years to come. The increasing Internet usage requires more bandwidth, which requires more networking equipment. Furthermore, the main devices that access the Internet could expand beyond traditional computers, smartphones, and tablets. Wearable smart devices might be the next big market. Samsung has already confirmed that the company is working on a smart watch, and there are rumors going around that Apple is working on the iWatch. Samsung executive Young Hee Lee stated, “We are preparing products for the future, and the watch is definitely one of them” (Bloomberg).

Furthermore, whether this market is a huge hit or not is actually not that important. Its success would just be a bonus for Cisco Systems, Inc. (NASDAQ:CSCO). According to Internet World Stats, only 34% of the entire world population were users of the Internet in June 2012. That equates to huge growth potential.

The bottom line

Looking at earnings is important. However, looking at earnings alone is not enough. Investors need to find the unfolding story that makes earnings sustainable. In the case of Cisco, it is the Internet. The Internet is at the center of technology revolutions happening today. Since Cisco dominates the networking industry and enterprise customers are loyal customers, this presents a very compelling story for why Cisco Systems, Inc. (NASDAQ:CSCO) is one of the best investments in the tech sector.

The article Going Beyond Earnings in Tech originally appeared on Fool.com and is written by Alvin Gonzales.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.