Cisco (CSCO) Stock Drops on Ericsson Partnership

Cisco (CSCO) stock is falling after the company entered into a strategic partnership with Ericsson (ERIC).
By Amanda Gomez ,

NEW YORK (TheStreet) -- Cisco Systems (CSCO) - Get Report stock is declining 1.28% to $28.08 in late morning trading on Monday after the company agreed to partner with Ericsson (ERIC) to develop faster and more reliable networks and boost sales by 2018.

The technology companies plan to work together on 5G networks, and cloud, Internet protocol and the Internet of Things services.

The partnership will generate $1 billion or more for each company by 2018 through multiple agreements, including system-based management and control, a broad resale agreement and collaborations in emerging markets.

Both companies will also enter into a licensing agreement for their respective patent portfolio that will include Cisco paying license fees to Ericsson.

"With the pace the market is moving, the successful companies will be those who build the right strategic partnerships to accelerate innovation, growth, and customer value," Cisco CEO Chuck Robbins said in a statement. "Our partnership will drive growth for both companies, unique value for our customers, and incredible innovation for the industry."

Separately, TheStreet Ratings team rates CISCO SYSTEMS INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

We rate CISCO SYSTEMS INC (CSCO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, notable return on equity, increase in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.6%. Since the same quarter one year prior, revenues slightly increased by 3.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, CISCO SYSTEMS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 3.1% when compared to the same quarter one year prior, going from $2,249.00 million to $2,320.00 million.
  • Net operating cash flow has increased to $4,138.00 million or 14.56% when compared to the same quarter last year. In addition, CISCO SYSTEMS INC has also modestly surpassed the industry average cash flow growth rate of 9.34%.
  • You can view the full analysis from the report here: CSCO

Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.

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