The estimated IP traffic by 2016 is anticipated to reach 1.3 trillion gigs. The expected exponential growth is creating raw opportunities for companies that provide various internet solutions in terms of hardware equipments and software.
This growth is anticipated from the fact
- Community websites traffic increase.
- Increased shipment of Internet-enabled handheld devices like Smartphones and Tablets
- Technology enhancement and higher internet speed as compared in the past.
Cisco Systems (CSCO, Financial) is the leader in the segment of internet equipment suppliers, security systems and computing. The company recently released its Q4 2014 results which were flat year over year; the company posted consolidated revenue of $12.4 billion. But from the investor’s point of view, it increased the quarterly cash dividend to $0.19 per common share.
Cisco is also looking to establish its brand in the Cloud computing business and has been acquiring privately held companies to have a strong foothold and dominance in the Cloud segment.
Cisco increased its product portfolio with acquisitions
Last year, Cisco acquired a U.K.-based company, Ubiquisys, for $310 million. This acquisition strengthened the product and services portfolio of Cisco, as Ubiquisys pioneers in providing seamless solutions for connectivity across heterogeneous mobile networks.
To further strengthen its product portfolio, Cisco acquired an Austrian company SolveDirect Service Management GmbH. This further enhances Cisco's capabilities in the services space with automation of process sharing, data and real time work flows.
Apart from acquiring companies, Cisco is always focused on returning capital to shareholders with stock repurchase programs and declaring regular dividends. It recently entered into the corporate bond market with its first debt sale in three years. This is a move of Cisco to fund its repurchase programs to safeguard the investor’s interest.
Cisco has been a market leader for providing security system and also Cloud solutions. The global Cloud-based security systems market which was worth around $2.13 billion in 2013 is expected to reach $3.1 billion by the end of 2015. The demand for Cloud computing is immense, but initial adoption by customers was slow since data security was a concern. Cisco is eyeing this market to influence its top and bottom line in future.
Cisco in Cloud
The Cloud market is a boon for companies that provide various solutions like storage, cyber security software and business solution software. Cisco has done well to benefit from this market.
Cisco Systems is an established name that dominates the market for routers, switches, networking equipment, etc. It is now further broadening its horizon by eyeing Cloud computing. To establish its name in the Cloud segment, it made various acquisitions with a motivation to step up its product portfolio for Cloud-enabled solutions.
It spent billions to acquire various established companies to provide Cloud solutions under one umbrella of services.
Cloupia was acquired for $125 million and Meraki for $1.2 billion by Cisco, both these companies provided cloud management services. It also acquired a company Broadhop, involved in Cloud programming services.
As a result of these acquisitions, the company has been able to quickly increase revenue in new markets while maintaining its position in its traditional business.
Conclusion
Cisco is positioned differently to benefit from the cloud and the growth of the internet equipment market. It is also looking to capitalize on the market through acquisitions by focusing on both hardware and software.
Cisco has increased its dividend by 180% since 2011 and has been generating record in revenues in sequential quarters. As an investor for technology stock, you won’t regret it if you invest in Cisco for the long term.
