Positive developments
In early 2013, Cisco Systems, Inc. (NASDAQ:CSCO) announced strong second quarter numbers, due in large part to the company’s growing market share in video, cloud infrastructure, and mobility. Net sales rose to $12.1 billion, an increase of 5% year over year. Net income rose to $3.1 billion from $2.2 billion for same period in 2012, an increase of 44%. The company currently trades at a P/E of 11.86, which is more attractive than the 50.57 of Hewlett-Packard Company (NYSE:HPQ).
One reason behind the company’s strong result is its continued initiative toward creating innovative products. For example, it introduced its elastic core networking device that enables service providers to launch services within minutes. The company’s higher market share in areas such as security, wireless networking, data centers, and switching and routing is helping to provide positive returns for shareholders.
Additionally, the company’s Unified Computing System (UCS) is pulling in sales for the first time in the company’s history. Cisco Systems, Inc. (NASDAQ:CSCO) has also posted solid sales growth for its server, the x86 blade, which occupies the No. 3 position in worldwide x86 blade server and a No. 4 position in the overall server market.
Along with creating the Smart Connected Communities platform to affect the manner communities are designed, Cisco Systems, Inc. (NASDAQ:CSCO) has built a transceiver technology to cut down on power need by over 70%, compared with others. The company claims no other industry solution can cut down as much on 100 gigabit deployment costs as its product. In comparison, Juniper Networks, Inc. (NYSE:JNPR)’ Transceiver NS-500-MSX is no longer available. Meanwhile, companies are selecting Cisco’s technology to enable 4G LTE and Mobile Internet delivery.
In the past few months, Cisco Systems, Inc. (NASDAQ:CSCO) collaborated with Citrix to expand its successful desktop virtualization product. The initiative helped increase sales in cloud networking, cloud orchestration, and mobile work styles. Although Cisco shares are trading close to their 52-week high, it is anticipated that the share price will sustain upward momentum over the next 12 months, and hit a median target of $24.50. Cisco Systems, Inc. (NASDAQ:CSCO) continues to perform well despite a tough market environment in the networking and communication sector.
Competition
Juniper Networks, Inc. (NYSE:JNPR) is one company pinning its hopes on sustained growth in the sector. Its motivation intensifies the competitive environment in the industry. For the fiscal 2013 first quarter, the company’s revenue was $1.05 billion, down 7% over the 2012 fourth quarter, and up 3% from the year ago quarter. Net income fell to $0.24 from $0.28 in the prior quarter, but was up from $0.16 in the year-ago quarter.
Its industry peer HP still has yet to gain traction in the sector. In in its fiscal 2013 first quarter, HP reported net revenues of $28.4 billion, down 6% year over year and down 4% when adjusted for the effects of currency. Earnings per share (EPS) was $0.63, down from $0.73 in the prior-year period but above its outlook of $0.34 to $0.37 per share.
Like Hewlett-Packard Company (NYSE:HPQ), Alcatel Lucent SA (NYSE:ALU) appears to be facing challenges. It posted fiscal 2012 fourth quarter revenues of $5.33 billion, up 13.8% quarter-over-quarter but lower by 1.3% year-over-year. It reported full year revenues of $18.79 billion, lower by 5.7% year-over-year. It recorded a fourth-quarter net loss of $1.78 billion or $0.78 per share.
The unhealthy top- and bottom-line record for Alcatel Lucent SA (NYSE:ALU) may not spark investor interest. Having a $1.72 one year target, the company shares have been trading within the $1.32- $1.40 band recently. The same thing can be said of Juniper, which has a $21.68 one-year price target. Peaking at $22.98 a few weeks ago, the stock has declined 25% to $17.36. With a P/E ratio of 49.60, Juniper also appears expensive compared to Cisco Systems, Inc. (NASDAQ:CSCO).
However, value investors could be more at ease with Cisco, which posted an EPS of $1.74. It posted strong 2013 first quarter results. Prospects seem bright, and it is expected that the company will pull off surprises with its products.
Summary
Cisco Systems, Inc. (NASDAQ:CSCO) is arguably the best managed company of the three. I expect the company to maintain its upward momentum. And its partnership with such companies as NBC Olympics and EMC Corporation (NYSE:EMC) has enabled it to expand business services without having to restructure the company. Investors are likely to be impressed by the multiple growth initiatives Cisco has in the pipeline for the next quarter, especially its elastic core network device.
The article The One Stock You Should Buy This Month originally appeared on Fool.com.
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