GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Cisco & Alcatel: Ready to Profit from the Internet of Everything

March 20, 2014 | About:



What Is the Internet of Everything?

The backbone of the IoE is, quite simply, Internet and network connectivity. It’s no hidden fact that the Internet has benefited nations, corporations, and individuals. Economic growth through electronic ecommerce and business enhancements are proven facts about the internet’s business capabilities. The internet further continues to evolve in changing and improving the world.

With the Internet of Things is quite popular nowadays, millions of devices are frequently being hooked up to the Internet. These things are generating demand for enhanced processing power as more and more people, devices and information are piling onto the Internet. These are leading us toward an interconnected environment.

Internet of Everything is gaining more ground by the day as more and more devices connect to each other. So, networking companies such as Cisco and Alcatel-Lucent (ALU) are all set to prosper in a new area of growth, courtesy the IoE.

Internet for Everything’s Potential Market

The projected market size of the IoE is estimated to be around $14.4 trillion in 2022. This is a huge opportunity for the likes of Cisco, Juniper, Alcatel-Lucent and many more globally. This raw market of connecting gadgets will create manifold openings for network equipment manufacturers, software-defined network solution companies, and network security. Let’s see how these companies will benefit from the Internet of Everything.

The Growth Areas for Cisco and Alcatel

Cisco is a leading network equipment manufacturer. In the IoE era, Cisco’s networking equipment will be in high demand as the amount of data that needs to be transmitted, stored and processed grows. The various types of connectivity applications in an IoE are machine to machine, machine to person, and person to person.

Cisco, with its wide product portfolio for network connectivity, should be a preferred choice for corporate houses and governments for various connectivity needs in devices. Some of the products of Cisco such as for optical networking, routers, switches, wireless, networking software, etc., are key ingredients for deploying IoE.

From the financial aspect as well, Cisco looks like a good bet to benefit from the Internet of Everything. At a trailing P/E of 12, Cisco is very cheap. Also, Cisco’s dividend yield of 3.10% is quite juicy. Looking forward, Cisco’s earnings are expected to grow at a CAGR of 10% for the next five years, which makes it a good bet to benefit from the Internet of Things.

Alcatel-Lucent, which is now primarily focusing on mobile networks, will also gain in the era of IoE. Mobile networks will be the backbone of IoE, and this is why Alcatel-Lucent will directly benefit from this market. Alcatel, in the past, has heavily concentrated on research and innovation, which puts it in a good position.

Ultra broadband is one of the innovations of Alcatel and this will help it reap the benefit of the IoE as high-speed connectivity for video and imaging will be in high demand. Connectivity speed will be the key to implementing IoE and Alcatel provides just that.

Alcatel-Lucent’s ultra broadband can be the most preferred choice of customers implementing IoE. This is due to the fact that the ultra broadband solution provides speed that is extremely fast with high performance IP network with high efficiency and negligible outage. It is the most cost effective in terms of power per bits and enables a customer to connect seamlessly from multiple devices to any kind of network.

Alcatel is also shedding off its loss making businesses to stay focused on the mobile network market. The company recently sold LGS Solutions for $200 million. It is also inviting bidders to sell off its enterprise business and is getting positive response from market leaders like Unify GmbH & Co. KG, a Gores Group LLC and Siemens AG (SIE) venture.

With earnings expected to grow 96% next year, Alcatel-Lucent certainly has a lot of things going for it and IoE could be the icing on the cake. So, investors looking for a fast-growing player in this space should look at Alcatel.

What Makes Cisco & Alcatel Benefit Most?

Deployment of IoE will be most preferred by companies that provide total solutions. Cisco and Cisco’s partners will be preferred in this regard since they can provide total solutions. Processing speed and connectivity equipment manufacturers will also gain highly from this market.

Cisco has already launched a Network Convergence System (NCS), which helps consumers in handling growing traffic. The product is mainly targeted at the IoE market and NCS might become the most preferred offering since traffic is expected to increase highly due to this market.

Videoscape, with enhanced features, is another product that’s been introduced by Cisco for the IoE environment. Videoscape is the TV in cloud and will be used by service providers and media companies to reduce operating expenses by capitalizing on IoE. The success story of this product is already exemplified with the 2014 Winter Olympics Using Cisco hardware and software for Videoscope.

The successful performance of IoE will be based on networks with high speed and throughput. Alcatel-Lucent is already claiming to provide the highest speed after conducting a few trials. The trials were conducted with the joint approach of Alcatel-Lucent and British Telecom, and results were terrific with speeds up to 1.4Tb/s and a record spectral efficiency of 5.7 bits per second on existing core network connections. These are the type of speeds over a network that can place Alcatel-Lucent above others.


Both companies are participating in this huge market in different capacities. So, investors have a wide range of choices to make the most of the Internet of Everything. This market is growing and is expected to be a multi-trillion dollar market going forward, giving investors all the more reason to invest in these two companies.

Rating: 0.0/5 (0 votes)


Please leave your comment:

Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial