Cisco’s Future Growth May Surprise You

While several companies, such as FireEye (FEYE), are facing lots of problems in the cyber security market mainly due to a changing business model, Cisco (CSCO) is performing very well. Although cyber security accounts for a small portion of Cisco’s revenue, it is expected to grow rapidly in the future.

In the most recent quarter, the company reported earnings per share of $0.63, $0.03 better than the estimates. On the other hand, the company’s revenue came in at $12.64 billion, $70 million greater than the estimates.

As a matter of fact, Cisco holds a leading position in the networking hardware market, as it enjoys approximately 60.7 percent market share of the switching market.
While the company’s switching and routing businesses lean towards a slow average growth, several other segments of the company are boosting up.

Security formerly accounted for a key business for the company, producing approximately $2 billion of revenue in FY16, but it is evolving at a double-digit rate even so. Throughout the past quarter, the company’s security business grew by 16 percent y-o-y, supported by a trickle of recent acquisitions.

Apart from this, Collaboration business is another growth area, producing $4.35 billion of revenue in FY16 and is mounting by 9 percent.
Cisco’s Future Growth May Surprise You
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Once again, Cisco is using acquisitions to drive growth, toting firms such as Acano and 1 Mainstream throughout the prior year.

As per Synergy Research, Cisco led the entire collaboration market with around 16 percent share throughout the fourth quarter of 2015. The company has a robust lead in the on-premises portion of the market, owning a 27 percent share, well ahead of second-position acquired by Microsoft.

However, the company lags in the cloud based portion of the market, but as per MarketsAndMarkets, the cloud collaboration market is projected to become nearly twice in size by 2021 to $42.5 billion. Therefore, Cisco will have lots of opportunities to achieve the strong position in the cloud collaboration market.

Till now, the company spent a total of $3.16 billion on acquisitions in FY16, helping to enhance areas the company expects will generate growth for years to come.


Cisco has a diversified business model and although it may seem that the stock is a slow mover, the various prospects mentioned above are exciting. Given Cisco’s growing presence in several booming industries, I think investors should not underestimate its growth potential going forward. All these factors make Cisco a good buy.
Published on Sep 29, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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