Cisco Systems (CSCO) boosted the entire technology networking space after it reported a strong quarter. Cisco earned $11.7 billion ($0.47 earnings per share) and boosted its dividend to $0.14 per share, up from $0.08 per share. Earnings were driven by price cuts and job cuts totaling 7,800. Cisco generated $3.1 billion in cash flow and its cash balance (and cash equivalents and investments) held steady at $48.7 billion.
Cisco also purchased 108 million shares during the quarter.
During the conference call, CEO John Chambers said that Europe is going to get worse before it gets better. Overall, the results show demand for networking gear is not poor.
Business Section: Investing Ideas
In the technology networking space, what companies should investors look at?
The following companies offer investors exposure to Cisco’s space, but trade at a far higher valuation:
1. Juniper Networks, Inc. (JNPR, Earnings, Analysts, Financials): Designs, develops, and sells products and services that provide network infrastructure to create environments for the deployment of services and applications over a single network. Market cap at $9.77B, most recent closing price at $18.45. Juniper recently partnered with Riverbed in an effort to jointly market their networking gear. This should bode well for both companies.
2. Riverbed Technology, Inc. (RVBD, Earnings, Analysts, Financials): Provides solutions to the fundamental problems associated with information technology (IT) performance across wide area networks (WANs) in the United States and internationally. Market cap at $3.25B, most recent closing price at $21.09. Riverbed rallied in the last quarter, after results were boosted by 3 top deals closing for WAN optimization products. Riverbed aims to grow 15% for the fiscal year.
The following companies related to the networking and communications space that investors should add to their watch list:
3. CIENA Corp. (CIEN, Earnings, Analysts, Financials): Provides communications networking equipment, software, and services that support the transport, switching, aggregation, and management of voice, video, and data traffic. Market cap at $1.75B, most recent closing price at $17.62. In its Q2 2012 earnings call, CIENA said it has a goal of 40% gross margins. The company has $6.36 in cash per share. CIENA’s quarter was strong because it won deals and took share from key competitors and grew its number of large customers.
4. Akamai Technologies, Inc. (AKAM, Earnings, Analysts, Financials): Provides services for accelerating and improving the delivery of content and applications over the Internet in the United States and internationally. Market cap at $6.66B, most recent closing price at $37.55. Riverbed has a partnership relationship with Akamai. Riverbed Steelhead Cloud Accelerator is put into Akamai’s network. This enables both companies to offer a combined product to a very large pipeline that is growing.
5. Acme Packet, Inc. (APKT, Earnings, Analysts, Financials): Provides session delivery network solutions that enable the delivery of interactive communications, such as voice, video, and multimedia sessions; and data services across internet protocol (IP) network borders. Market cap at $1.14B, most recent closing price at $16.55. Acme met lowered Q2 estimates, but cut its revenue forecast for the full year to between $270 to $275 million. Its earnings per share forecast of $0.43 to $0.47 per share is well below its February forecast that was nearly double that.
6. F5 Networks, Inc. (FFIV, Earnings, Analysts, Financials): Provides technology that optimizes the delivery of network-based applications, and the security, performance, and availability of servers, data storage devices, and other network resources in the Americas, EMEA, Japan, and the Asia Pacific. Market cap at $8.18B, most recent closing price at $103.56. Corporate demand for cloud storage and services should bode well for data centre suppliers like F5.
The following technology companies related networking hardware and are in the midst of a transition:
7. Hewlett-Packard Company (HPQ, Earnings, Analysts, Financials): Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $38.49B, most recent closing price at $19.52. Similar to Cisco, HP reduced its workforce and aligned its product offering in an effort to improve profit. The transition will not be quick: it will take many years before a leaner HP emerges.
8. Dell Inc. (DELL, Earnings, Analysts, Financials): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap at $21.46B, most recent closing price at $12.22. Dell recently joined Cisco and HP in starting to pay a dividend.
Written by Chris Lau. Disclosure: Long position on Riverbed (RVBD).
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Juniper Networks, Inc. (JNPR, Chart, Download SEC Filings)
- Riverbed Technology, Inc. (RVBD, Chart, Download SEC Filings)
- CIENA Corp. (CIEN, Chart, Download SEC Filings)
- Akamai Technologies, Inc. (AKAM, Chart, Download SEC Filings)
- Acme Packet, Inc. (APKT, Chart, Download SEC Filings)
- F5 Networks, Inc. (FFIV, Chart, Download SEC Filings)
- Hewlett-Packard Company (HPQ, Chart, Download SEC Filings)
- Dell Inc. (DELL, Chart, Download SEC Filings)
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