Cisco (CSCO, Financial) was slightly down in 2015, but the stock has managed to remain green this year. Although the company surpassed consensus estimates in terms of earnings as well as revenue, its revenue declined by 2.6% year over year. Most significantly, the company’s two key segments, collaboration and data center, reported revenue declines.
According to International Data Corp., the Ethernet switch market posted a growth of 7.2% and accounts for $110.4 million. On the other hand, the router market displayed a substantial growth of 31% year over year and reached $68.6 million.
Escalating expenditures from both enterprise segments as well as a service provider boosted the switching market. As a matter of fact, India acts as a significant international market as it provides a lot of growth opportunities for the company.
Bearing that in mind, Cisco endured its governance with 63% market followed by Juniper (JNPR, Financial) and Huawei in the Indian local area network (LAN) market. However, when it comes to the Indian WLAN market, the company holds a second position at 17.8% market share following the D-Link at 28.68%. Moving ahead, both the markets are expected to grow in the future.
The company is in its transition phase as it has been focusing on acquiring software and cloud companies, but the company is also focusing on the security segment because the security business is shifting toward subscriptions.
On the other hand, the Internet of Things (IoT) market is projected to surge at a compounded annual growth rate (CAGR) of 23%, resulting in approximately $16 billion of revenue in the next six years. Keeping in mind the security and standardization issues related to the evolution of connectivity, Cisco is well poised to gain huge benefits in the years ahead.
Cisco’s management said that it can deliver a majority of the connectivity as well as security needs crafted by IoT as it owns the network. The company is also on its way to providing tools and applications programming interfaces to IoT device manufacturers that are designed to reduce security threats and standardize them.
Furthermore, the company is uniting its name with giant companies like Jasper Technologies to strengthen its service proposing and accelerate its position in IoT connectivity as well as analytics platforms.
Conclusion
Cisco looks well poised to gain huge advantages from the rise of the Internet of Things market, as security is one of the most important aspects when it comes to connectivity. Moreover, the company trades at price-earnings (P/E) ratio of just 14.55, which clearly suggests that the stock is not expensive at its present level.
As a result, Cisco's future still looks bright, and it's a buy at current market price.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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