There’s more to Cisco than networking
While Thompson may disparage Cisco’s long-term networking potential, investors have to realize that there is more to this business than managing data. Cisco recently unveiled its virtual cloud-routing and WAN optimization platform aimed at taking a bite of out Riverbed Technology, Inc. (NASDAQ:RVBD)‘s 52% share. Plus, with Cisco Systems, Inc. (NASDAQ:CSCO)’s $46 billion in cash, there’s a good chance that this level of assault on rivals has only just begun.
What’s more, Cisco also has a strong security services business. While security is not growing at the rate of Fortinet Inc (NASDAQ:FTNT), Cisco is doing more than holding its own. And Cisco’s acquisition of Intucell extends Cisco’s reach into new end markets like self-optimized network, or SON, which support mobile carrier networks across the world. This is while also allowing Cisco to extend its network intelligence. Again, this is yet another example of how Cisco Systems, Inc. (NASDAQ:CSCO) is adapting to changing trends.
Fundamentals are too strong
The company has become a savvy acquirer and has used the recent macro headwind to its advantage, while rivals like Juniper Networks, Inc. (NYSE:JNPR) have been looking for ways to cut costs. And considering how brutal these recent earnings reports have been, if Thompson is right about Cisco (I don’t believe he is), it would imply that rivals like Juniper and Riverbed should be in worse shape.
Here again, Cisco Systems, Inc. (NASDAQ:CSCO)’s strong cash position can buy access into many markets. This is not an advantage that either Juniper or Riverbed has. I don’t think that Thompson made this consideration. Thompson also listed Broadcom Corporation (NASDAQ:BRCM) as one of the companies that should benefit from these new trends, while citing Broadcom Corporation (NASDAQ:BRCM)’s advantage with ARM Holdings plc (ADR) (NASDAQ:ARMH) V8 architectural license.
This is true. However, given Broadcom Corporation (NASDAQ:BRCM)’s $19 billion market cap and Cisco’s $46 billion in cash… well, as I’ve said before, there’s nothing stopping Cisco Systems, Inc. (NASDAQ:CSCO) from buying its way into new territories. All of this makes Cisco still one of the best and safest stocks to own. Despite what Thompson may want to believe, based on cash flow projections and sales trends, which includes 22% aggregate growth in services, this stock is worth (at least) $30 per share.
The article Is Cisco Really in Danger? originally appeared on Fool.com.
Fool contributor Richard Saintvilus has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems (NASDAQ:CSCO) and Riverbed Technology (NASDAQ:RVBD). The Motley Fool owns shares of Riverbed Technology.
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