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The Market Is Waking Up to Cisco

Leopold's mention of margins was also noteworthy, which suggests increased profitability while Cisco endeavors to build its SDN business. Leopold was proven right as Cisco just posted a solid first-quarter gross margin of 61.4%, which indicates the company's strong competitive leverage against the likes of F5 Networks (FFIV) and Juniper (JNPR) remains steady.

Elsewhere, revenue surged 5.4% to $12.2 billion, which led to a non-GAAP net income of $2.7 billion, which represents year-over-year growth of 4.7%, or 51 cents per share -- topping Street estimates of 49 cents. John Chambers, Cisco's CEO said that the company managed to execute "in a slow, but steady economic environment."

In other words, amid such periods of turbulence with weak carrier spending and soft enterprise IT environment that has not fully rebounded to more robust levels, Cisco still managed to outperform its rivals and exceed expectations. This is while amassing cash levels of more than $47 billion.

In fact, while analysts still model the stock for $25 to $30 per share, when applying a modest 4% to 5% free-cash-flow growth, the stock still supports a fair market value of about $35. (Shares were recently trading at about $23.50.) Cisco remains a strong buy. But if you've been reading me for a while, you would have already known this -- even though the Street is just now waking up to this idea.

At the time of publication, the author held no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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