Will This Acquisition Help Cisco Systems (CSCO) Stock Today?

NEW YORK (TheStreet) -- Cisco Systems Inc. (CSCO) announced its intent to purchase Tail-f Systems, a privately held multi-vendor network service orchestration solutions provider, in order to help accelerate the company's cloud virtualization strategy of delivering software that increases value to customers' applications and services.

Cisco is expected to pay approximately $175 million in cash and retention-based incentives in exchange for all shares of Tail-f, and the deal should be completed by the end of the fiscal year 2014, the company said.

Shares of Cisco are down -0.12% to $24.50 in early trading on Monday morning.

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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 attractive valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • Net operating cash flow has slightly increased to $3,198.00 million or 3.36% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.84%.
  • Despite currently having a low debt-to-equity ratio of 0.37, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.19 is very high and demonstrates very strong liquidity.
  • CISCO SYSTEMS INC's earnings per share declined by 8.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CISCO SYSTEMS INC increased its bottom line by earning $1.86 versus $1.49 in the prior year. This year, the market expects an improvement in earnings ($2.04 versus $1.86).
  • The gross profit margin for CISCO SYSTEMS INC is rather high; currently it is at 65.34%. Regardless of CSCO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.94% trails the industry average.
  • You can view the full analysis from the report here: CSCO Ratings Report
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