Tag Archives: Cisco

Cisco Systems: Bulls, Here It Comes

Cisco Systems (CSCO) has been caught in a long-term trading range ever since the dot-com bubble burst, and those long the stock have had few had few benefits for their positions with the exception of the stock’s strong dividend yields. But all of this looks ready to change, as short interest in CSCO has been waning for the past 18 months and market valuations are now pushing through critical levels on the monthly price history. Changes at the managerial levels, recent beats in quarterly earnings, and emerging revenue drivers all point in the positively direction in a confluence of events that should bring rewards for bulls that have been holding the stock for a long period of time. In our view, CSCO is on the verge of a major breakout that will define the bullish trajectory from here on a multi-year basis. There is still time to get long the stock, as market valuations have not yet broken above the critical 33.80 level we will discuss here.

In the long-term view shown above, we can see that CSCO has had an interesting price history over the last 25 years. A period of indecision has followed the initial rise-and-collapse and this has created a very strong trading range between 13.95 and 33.80. More recently, markets have been pressuring the top areas of this zone — and this activity has been further supported by a stable earnings performance that has beaten expectations in the last few quarters. In addition to this, the company is showing healthy margin figures while the stock is trading with an attractive 17 PE and a 3.55% dividend yield. This is well above the industry average, and so if you are a dividend investor looking for tech exposure you could do a lot worse than entering into a new position in CSCO at current levels.

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Analyst recommendations: Yahoo Finance

The bullish sentiment is reflected in the analyst surveys, with the census showing “buys” or “strong buys” for the stock even while it is trading at these relatively elevated levels. The real question here is whether or not the company will be able to breath life into what is viewed by many as an outdated tech entity and so it will be important for investors to identify areas that might boost revenue performances in the next few quarters.

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The action here could be guided by the contrasts, as the latest earnings report showed that revenues were down year-on-year. This has been the case for seven straight quarters, but the results were mostly inline with the estimates. In the report, CSCO did surpass the consensus earnings estimates once again (at 61 cents in earnings per share). This type of performance has been par for the course since Chuck Robbins took the helm as CEO, and so there is something here for investors to grab onto in terms of the long-term outlook for CSCO’s quarterly performance outlook.

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Helping matters here will be the significant decline that is now being seen in the US dollar. Relative to its most commonly traded assets, the greenback has lost roughly 9.8% and this will almost certainly lead to upside surprises in CSCO’s earnings performances for the second half of 2017. This is one market element that has come as a significant surprise for most analysts, as the pro-growth policy agenda promoted by US President Donald Trump has had difficulty gaining traction. This has hurt the US Dollar but is something that will come as a significant benefit to companies with significant overseas sales totals. Information technology falls behind only energy in terms of the sectors that stand to benefit from these trends, so bullish investors should expect upside earnings surprises in the next few releases.

CSCO Chart Analysis: Dividend Investments.com

As one of the few true survivors of the dot-com bubble, Cisco Systems has proven itself as a stable investment that is capable of withstanding selling pressure. With a price-to-book value of just over two, the company still looks well-positioned and undervalued. The key area to watch here is the range resistance that is now found at 33.80, as a break here would suggest that a new sheriff is in town and that the sideways sluggishness is over. Bullish readings in the Commodity Channel Index strongly support this upside outlook as there now appears to be very little selling pressure left in the market (with short interest at 0.91% of the total float). The stock’s 3.55% dividend yield is well above the industry average (of 1.39%) and the payout ratios are still seen at sustainable levels. On balance, this points to strong upside in the stock, so we will remain long and collect the attractive dividends associated with this tech superstar.

What is your position on Cisco Systems? We look forward to reading your comments. Stay tuned to Dividend Investors and receive our next alerts by clicking the “Follow” button at the top of the page.

Disclosure: I am/we are long CSCO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Unicorn club in February: 2 new entrants, $2.24B raised, and Cisco annexes IoT

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There is still life in the unicorn funding world.

The swath of negative articles in the past six months about the coming demise of unicorns apparently didn’t keep investors from joining the bandwagon. Even funds like Fidelity, which saw major mark-downs in its portfolio, made one investment in the period. We also saw Accel Partners raise a $ 1.5 billion late-stage fund — up 50 percent from its last late-stage fund.

It is not surprising then that February was more of the same. There were about 11 financings, totaling to $ 2.24 billion raised. Interestingly enough, 5 of those financings were up-rounds, with the biggest mark-up being Magic Leap (valuation up by $ 2.5B). In the meantime, in the public market, prior unicorns saw their stock drop, some significantly.

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February startup financing: $ 2.24 billion

Brain repair, virtual reality, the Internet of Things, and good old ecommerce topped the February startup financing of $ 2.24 billion.

Internet of Things leader Jasper was bought by network leader Cisco Systems for $ 1.4 billion — up $ 400 million from its previous valuation almost 2 years ago. Jasper’s platform connects homes, medical devices, iPhones, dog trackers, and other devices in over 100 countries. Cisco plans to add industrial-grade Wi-Fi and improve analysis of data from all those smart devices.

Two new unicorns

Swiss brain science startup MindMaze picked up $ 100 million in new funding to become one of February’s two new unicorns. The company, spun off from the Swiss Federal Institute of Technology, is branching into broader areas of consumer health after launching virtual reality products to stimulate neural recovery in brain injury survivors. The new funding was from London-based Hinduja Group.

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Above: View the high-resolution version on VB Profiles here. (Disclosure: VB Profiles is a cooperative effort between VentureBeat and Spoke Intelligence.)

The other new unicorn is Dubai’s Souq.com, otherwise known as the Amazon of the Middle East, which added $ 275 million in funding from Tiger Global, Naspers, and others. Souq.com, founded in 2005, offers 400,000 products to 24 million shoppers a month.

Top funding of the month: Magic Leap

But the month’s top fundraiser by far was Magic Leap, a Florida virtual and augmented reality company now valued at $ 4.5 billion after bringing in $ 793.5 million in February. The new funding, led by Alibaba, will speed up the introduction of the company’s “Mixed Reality Lightfield” experience and other products using Alibaba’s platforms. Other funders include several U.S. financial companies and Warner Bros.

Oscar, Uber, Snapdeal, and more

Oscar Health Insurance got a $ 400 million cash injection from Fidelity and previous Oscar funders. The New York City company, which recently expanded into three other states, aims to use technology and design to humanize health care, offering such benefits as free telemedicine.

Other top fundraisers were the previously mentioned Souq.com ($ 275 million) and Uber and Snapdeal at $ 200 million each. Uber raised the investment from Luxembourg-based LetterOne to open its ride-sharing doors to emerging markets. Funding for Snapdeal, India’s biggest ecommerce company, came from Canada’s Ontario Teachers’ Pension Plan and India’s new venture capital firm Iron Pillar. The money will go to upgrades across the Snapdeal system.

Nigerian ecommerce conglomerate Africa Internet Group picked up $ 83 million in new funding from AXA Insurance, which gets an 8 percent stake and access to AIG’s network to sell insurance in Africa. AIG operates in 26 countries, with 71 subsidiaries from retail to real estate, travel, and person-to-person lending.

Hortonworks announced a secondary public offering of 8,425,000 shares at $ 9.50 per share. Goldman Sachs, Credit Suisse Securities, and RBC Capital Markets are acting as joint lead book-running managers for the $ 80 million offering. The Silicon Valley company was formed to speed adoption of the Yahoo Hadoop big data software.

Southern California gaming software and device maker Razer raised $ 75 million, selling a 5 percent stake to investors. The round was led by Digital Grid (Hong Kong) Technology, bringing the company’s valuation to $ 1.5 billion. Razer started with basic gaming peripherals in the 1990s and is now moving into virtual reality devices and wearables.

And Seoul-based Yello Mobile got $ 30 million in new funding from Japan’s SBI Holdings. The diverse mobile media company, established in 2012, has grown rapidly by acquiring over 80 other app startups.

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Cisco strengthens China operations with Inspur joint venture

Cisco corporateCisco Systems is to form a joint venture with Chinese server maker Inspur, selling networking and cloud computing products in China. Cisco and Inspur will jointly invest $ 100 million in the project.

The partnership comes in the face of mutual suspicion between the US and Chinese government amid claims and counter claims of state sponsored cyber security threats.

In June Cisco was forced to remove several of its senior executives in China, amid reports of falling sales slide and Chinese government fears about the foreign ownership of networking equipment.

Cisco’s China sales fell 20 per cent on the previous year in the quarter ending on April 25 at a time when its global revenue gained 5.1 per cent. As its share of the Chinese router market fell from 21.2 per cent to 9.4 per cent the lost sales went to local rival Huawei Technologies, according to Bernstein Research.

Direct selling became more challenging, The Wall Street Journal has reported, after US National Security Agency whistleblower Edward Snowden said the NSA put surveillance tools in US technology products sold overseas.

US-Chinese technology company partnerships are growing in number and Microsoft announced on Thursday an alliance with Baidu and the Chinese state-owned private investment firm Tsinghua Unigroup on cloud technology. Last week Dell unveiled plans to invest $ 125 billion over five years in China. Earlier this year, IBM pledged to help develop China’s advanced chip industry with a ‘Made with China’ strategy, while chipmakers Intel and Qualcomm are developing chips with smaller Chinese companies.

Chinese President Xi Jinping’s arrived in Seattle this morning on a state visit to the US.

Chinese officials have said the partnerships will follow the pattern of car manufacturing agreements in the past, with foreign technology firms granted market access in return for shared technology and co-operation with Chinese industry.

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