Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.
An intriguing question this week concerned one of the world’s best-known technology stocks. Cisco Systems offers leading-edge products in a highly competitive industry. Pat examined just how it plans to maintain its position in the face of rapid change and overseas competition.
Q: Could you please give me your opinion on Cisco Systems? Thank you kindly.
A: Cisco Systems Inc. (symbol CSCO on Nasdaq; www.cisco.com), is a leading maker of hardware and software that links and manages computer networks. The company’s hardware includes routers, local-area network (LAN) and asynchronous transfer mode (ATM) switches and dial-up access servers.
Cisco’s Internet Operating System (IOS) software ties these products together, delivers network services (which interconnect and move information between networks) and lets programs run across networks. Cisco gets about 46% of its revenue from overseas customers.
The company also sells home routers and networking products to consumers under the Linksys brand. Consumer products account for less than 5% of Cisco’s sales.
As a member of my Inner Circle, you will get individual answers to your personal investment questions. And you will see my answers to questions other investors like you are asking. In fact, you will get virtually all the investment advice I have to give. You will have access to all of our advisories – The Successful Investor, Wall Street Stock Forecaster, Stock Pickers Digest and Canadian Wealth Advisor – and full access to the members-only, password-protected Inner Circle section of The Successful Investor Network website.
Although my team carefully researches all the stocks that members ask about, I personally review each and every recommendation. To ensure this close personal attention, only a limited number of members can be admitted to our Inner Circle. Under the pressure of world events, even more investors are asking for my personal investment advice. We are nearing our membership limit already. Click here to secure your membership in the Inner Circle right away.
Cisco recently announced a major restructuring plan that includes closing its Flip camcorder operations and other underperforming businesses. In addition, Cisco will cut 9% of its workforce.
If you exclude one-time items, such as severance costs, Cisco’s earnings fell 4.3%, to $9.0 billion, in its 2011 fiscal year, which ended July 30, 2011. Revenue rose 7.9%, to $43.2 billion from $40.0 billion.
Technology stocks: Strong balance sheet contributes to product development
Cisco’s strong balance sheet will let it continue to spend heavily on product development and share buybacks. The company holds cash of $44.6 billion, or $8.20 a share. This technology stock’s $16.2 billion of long-term debt is just 15.9% of its market cap, or 1.6 times its annual cash flow of roughly $10.2 billion.
Earlier this year, Cisco started paying a quarterly dividend of $0.06 a share. The annual rate of $0.24 yields 1.3%.
You can see Pat’s recommendation on Cisco Systems in this week’s Inner Circle Q&A. In his buy-hold-sell analysis, he looks at whether the anticipated savings from Cisco’s restructuring plan will help it compete with low-cost Chinese manufacturers. He also examines the effectiveness of its research and development program as the company seeks to maintain its position in a rapidly changing and competitive industry.
Inner Circle members see Pat’s analysis and recommendations on the stocks other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this special investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.
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