Cisco Systems, Inc. (CSCO), International Business Machines Corp. (IBM) & Intel Corporation (INTC): A Fundamental Perspective of Three Giants of the Technology World

Cisco Systems, Inc. (NASDAQ:CSCO)Cisco Systems, Inc. (NASDAQ:CSCO), International Business Machines Corp. (NYSE:IBM), and Intel Corporation (NASDAQ:INTC) are the giants of the technology world. These companies are providing products and services to different areas of information and communication technology. Importantly, these companies are the drivers of innovations in their respective segments. Here is a look at how these companies are placed from a fundamental perspective.

2009 2011 2012
Company Rev. ($B) NI ($B) NPM Rev. (B) NI ($B) NPM Rev. ($B) NI ($B) NPM
Cisco 36.117 6.134 16.98% 43.218 6.49 15.02% 46.061 8.041 17.46%
International Business Machines 95.759 13.425 14.02% 106.916 15.855 14.83% 104.507 16.604 15.89%
Intel 35.127 4.369 12.44% 53.999 12.942 23.97% 53.341 11.005 20.63%

For Cisco, the financial year ends in July while for IBM & Intel, it ends in December.

A fundamental perspective of Cisco

Cisco Systems, Inc. (NASDAQ:CSCO) designs, manufactures, and sells Internet Protocol-based networking and other products & services. The products are used for transporting data, voice, and video around the world. For the year ending July 28, 2012, Cisco reported revenue and net income (NI) of $46.06 billion and $8.04 billion, respectively. Compared with 2009, Cisco Systems, Inc. (NASDAQ:CSCO)’s revenue and net income grew 27.5% and 31%, respectively, and compared with 2011, the growth was 6.6% and 23.9%, respectively.

Though the net profit margin (NPM) improved in 2012 over 2009, it has remained nearly flat at around 17%-17.5%. For the quarter ending Jan. 26, 2013, revenue/NI growth was 5% and 44%, respectively, but increase in net income included a $926 million tax settlement. Even if this gain were excluded, the margins have shown slight improvement. Reduced Government & Corporate spending and a lethargic economy impacted the performance. Cisco Systems, Inc. (NASDAQ:CSCO) is trading at 2.33 times sales, and the P/E (TTM) is 11.89 compared to a forward P/E of 9.84. Cash on books is $46.38 billion and the debt-equity ratio is 29.34.

A fundamental perspective of IBM

International Business Machines Corp. (NYSE:IBM) operates through five business segments, Global Technology Services (IT infrastructure and business process services), Global Business Services (Consulting and Application Management Services), Software (middleware and operating systems software), Systems and Technology (solutions requiring advanced computing power and storage capabilities), and Global Financing (facilitates clients’ acquisition).

In 2012, International Business Machines Corp. (NYSE:IBM) recorded revenue of $104.5 billion and net income of $16.6 billion. This represents a growth of 9.1% and 23.7% in revenue and net income, respectively, over 2009. Compared with 2011, sales have declined 2.25% but net income has grown 4.72%. Net profit margin has expanded from 14% in 2009 to 15.9% in 2012.

In the previous quarter, revenue and net income declined 5.1% and 1.1%, respectively. The lackluster performance was due to the decline in hardware sales and lower dollar sales in Japan due to a weakening Yen. International Business Machines Corp. (NYSE:IBM) is trading at 2.09 times sales, and the trailing P/E is 13.4 while the forward P/E is 10.59. Cash on books is $11.99 billion, and the debt-equity is high at 173.82. The five year average dividend yield is 1.8%.