Cisco (CSCO, Financial) recently reported its first quarter 2016 earnings with strong revenue growth across the majority of its business divisions. With revenue growth in data center and collaboration up 24% and 17% from the previous quarter, the firm also reported large strides in security.
In a recent Barclays investor discussion, Hilton Romanski, chief strategy officer at Cisco, reported on the firm’s initiatives around security and why it is becoming an increasingly important offering within the technology industry. According to Romanski, the technology industry’s Cloud growth has provided for significantly expanded capabilities; however, with these added capabilities are vulnerabilities to security threats. One of the main things holding companies back from expanding their offerings to the Cloud is their fear of security. With numerous options for Cloud applications in today’s environment including public Cloud, private Cloud and a hybrid of both, companies want to get the most from their Cloud enterprise system while also ensuring security.
In security, Cisco has taken a leading position in the industry. In the first quarter of 2016 it reported revenue of $485 million in security with a comparable quarter growth rate of 7%. An initiative around security specifically in the Cloud helped Cisco achieve this growth in the first quarter through both increased organic capabilities and acquisitions. Well known for its acquisition-oriented growth strategy, the firm has acquired numerous security companies over the past four years that have contributed to revenue growth. Previous acquisitions beginning to add to revenue in security include Meraki in 2012, Sourcefire in 2013 and ThreatGRID in 2014. Meanwhile, in 2015 the firm has acquired two firms to help it expand its security offerings. Security acquisitions for Cisco in 2015 have included OpenDNS and Lancope.
According to Romanski, Cisco plans to see continued momentum in its security revenue with further enhancements in security, potentially through new acquisitions, which will continue to add value for the firm and its customers. Year to date Cisco is down 5% along with the broader market as large cap stocks have trended lower for the year. However, at a currently low price of $26.16, the stock presents a buying opportunity showing upside potential of 25% in the near-term as global technology stocks regain momentum in the new year and the firm’s integration of newly acquired offerings shows even greater value for shareholders.
Disclosure: I do not hold any shares of Cisco.
