What Lies Next for Cisco Systems, Inc. (CSCO)?

The SDN market is expected to grow to $3.7 billion by 2016, as projected by IDC . Various big name companies such as IBM, VMware and Juniper Networks have joined hands to further develop the market.

While Cisco Systems, Inc. (NASDAQ:CSCO)’s SDN initiative is still in the infancy stage but it has edge over its competitors like Brocade Communications Systems, Inc. (NASDAQ:BRCD). Brocade Communications is looking to capitalize on its earlier acquisition of Vyatta. The company is using Vyatta 5400 vRouter series as its flagship product for SDN market. However, Cisco is in unique position to draw synergies from its established hardware networking hardware capabilities.

Investment potential

While Cisco Systems, Inc. (NASDAQ:CSCO) is currently trading near its 52-week high, it still has good upside potential left. The company is fundamentally stronger than ever now. While its revenue shows solid growth, Cisco is also able to boost its margins by containing its costs. In the third quarter, the company augmented its gross margin by 1.4%. The stock is currently trading at historically low P/E ratio of about 13, providing a very compelling reason to park your funds in the stock. Additionally, Cisco is also a good income stock. The company has consistently increased its dividend and currently offers a dividend yield of nearly 3%. While the stock is not expected to regain its lofty lifetime high price level of $80, you can expect decent upside in this stock.

Sharma Rina has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems.

The article What Lies Next for Cisco? originally appeared on Fool.com.

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