This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Investors Ignoring Cisco . . . but Not for Long

Stocks in this article: CSCO

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( StreetAuthority) -- The world economy may be struggling to recover from the depths of the Great Recession, but there are still pockets of the market that are seeing explosive growth. Demand for electronic gadgets held up amazingly well during the credit crisis, which suggests consumers consider their smartphone or tablet computer necessities along with food and shelter. In fact, the housing bust demonstrated that shelter isn't worth all that much these days.

And it isn't actually the hardware that people crave, but rather the content that their connection to mobile devices provides. Data, in the form of email, texting - and, increasingly, multimedia from the likes of YouTube and Netflix (NFLX) -- are driving explosive growth in Internet content and the fixed and wireless technology that route across the globe.

This growth shows few signs of abating. Networking giant Cisco (CSCO) effectively controls the market for Internet Protocol-based networking and predicts an 18-fold jump in Internet data traffic by 2016. Specifically, it expects an eventual traffic rate of 10.8 exabytes per month, or 130 exabytes annually. To put that into some additional context, this equates to 33 billion DVD downloads, and literally quadrillions of music and text downloads.

Follow TheStreet on Twitter and become a fan on Facebook.

Without fully understanding the level of traffic that equates to, I'm confident that means a rapidly growing amount of routers, switches and optical networking gear will be needed. Cisco sells billions of dollars of these products each year. The company reported total revenue of $43.2 billion last year, but it still has room to grow.

Last year, Cisco was criticized for focusing on its "new products" category, such as video that connects households and its Linksys-branded routers for the consumer market. It admittedly took its eye off the ball and lost some of its competitive edge in the bread-and-butter routers and switches that accounted for $20.5 billion, or 47.4% of last year's total revenue.

But in relatively quick fashion, Cisco shuttered or jettisoned a number of lagging divisions, such as the Flip video camera device. CEO John Chambers characterized it as one of the most transformative years ever at Cisco and committed to refocusing on the core networking operations. He also ruthlessly cut more than $1 billion in annual costs and initiated a dividend payment to shareholders to prove that Cisco will be more mindful of steady profit growth and willing to share it with loyal investors.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs