It's still a little surprising to see how little Cisco's (CSCO - Get Report) stock has moved this year. The stock closed Thursday at $23.01, up 4% year to date. But Cisco stock is down more than 12% over the trailing twelve months. This won't continue. As with IBM, Cisco has struggled with revenue growth. But this is a company, whose equipment still powers more than half of the internet.
In the most recent quarter, Cisco reported earnings per share of 47 cents, excluding items, on revenue of $11.16 billion. The company beat consensus earnings estimates of 46 cents on $11.03 billion in revenue. Management also raised the company's quarterly dividend to 19 cents from 17 cents a share.
Cisco is not going to put up gaudy numbers like it did at the height of the dotcom era. But it doesn't have to. Investors only need to understanding where the company is trying to go. Its recent acquisition points to higher-margin cloud business and transitioning out of hardware.
Cisco still has ambitions of being a traffic highway. With the company's ability to collect a toll on each bit of data, investors would be wise to buy and hold one of the most consistent blue-chip tech stocks on the market.
Last on our list is Microsoft (MSFT - Get Report). The company's board, which under former CEO Steve Ballmer, was everyone's punching bag. But things have changed. While I haven't been the company's biggest fan, I've nonetheless been pleased with the direction in which new Satya Nadella is taking the company. The stock closed Thursday at an even $40, up close to 8% year to date.
Although the company recently reported flat revenue, it was nonetheless encouraging that Microsoft posted gains from its dominant Windows franchise, which many had feared was in decline. And when you factor the improvements in cloud computing services like Azure, it does show that Microsoft's transition from a PC-dependent business is taking shape.
Equally, strong was revenue from the company's devices and consumer products, which rose 12% to $8.30 billion. Here, too, as with IBM and Cisco, Microsoft has struggled with growth. But in Nadella, the company has installed someone who is unafraid to think outside the box and take some risks.
In the next five years, investors may not recognize what Microsoft has become, which will be a good thing. I project a more dominant cloud player that will create apps for the sort of Internet-of-Things transition that companies like Intel are looking to support. At around $40 today, Microsoft stock should reach $60 to $75 in the next five year. And the company pays one of the best dividends at $2.8%.
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At the time of publication, the author was long AAPL and held no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.