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Cisco Systems, Inc. (CSCO)

Analyst: Ryan Youngstrand Thursday, October 12, 2009. Cisco Systems, Inc. (CSCO). CSCO currently (Yahoo). Stock Price $23.30 52-week range $13.61-24.83 Beta 1.21 – Reuters.com EPS (TTM) $0.98. What they do… (Yahoo). Sector: Technology Industry : Networking and Communication Devices

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Cisco Systems, Inc. (CSCO)

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  1. Analyst: Ryan Youngstrand Thursday, October 12, 2009 Cisco Systems, Inc. (CSCO)

  2. CSCO currently (Yahoo) • Stock Price • $23.30 • 52-week range • $13.61-24.83 • Beta • 1.21 – Reuters.com • EPS (TTM) • $0.98

  3. What they do… (Yahoo) • Sector: Technology • Industry : Networking and Communication Devices • “…founded in 1984 and is headquartered in San Jose, California.” • “…designs, manufacturers, and sells Internet Protocol (IP)-based networking and other products to the communications and IT industry worldwide.” • “It serves enterprise businesses, public institutions, telecommunications companies, commercial businesses, and personal residences through systems integrators, service providers, resellers, distributors, and retail partners.” • “…has strategic alliances with Accenture Ltd; AT&T Inc.; Cap Gemini SA.; EMC Corporation; Fujitsu Limited; Intel Corporation; Italtel SpA; Johnson Controls Inc.; Microsoft Corporation; Nokia; Nokia Siemens Networks; Oracle Corporation; SAP AG; Sprint Nextel Corporation; Tata Consultancy Services Ltd.; VMware, Inc.; and Wipro Limited.”

  4. Swot analysis • Strengths: • Diversified: Commercial, Residential, etc. • Worldwide • Service Margins Improved 400 Basis Points > Total Gross Margin 65.3% • High-Quality Products and Services • Scale Advantages • 70% of the $21B Switching Market > Largest Competitor, HP – 5% • Has a Virtual Duopoly • $35B Cash – $10B LT Debt • Weaknesses: • Generally Not a Need > Affected by the Economic Condition • Security Over Video Systems • General and Administrative Expenses Increased 110 Basis Points > Operating Margin 23.5% from 24.0%

  5. Swot analysis • Opportunities: • Continued Growth > Advanced Technologies • Service Providers Moving Towards Single IP > CSCO’s Specialty • Threats • May be Pursuing Growth Too Fast > 12-17% LT Growth Estimate

  6. Financial ratios (Reuters)

  7. Financial ratios cont’d

  8. Valuation ratios (Reuters)

  9. Trend analysis (Morningstar)

  10. Net income ($Mil) (Morningstar) • TTM > 6,134.0 • 2009 > 6,134.0 • 2008 > 8,052.0 • 2007 > 7,333.0 • 2006 > 5,580.0 • 2005 > 5,741.0 • 2004 > 4,401.0 • 2003 > 3,578.0 • 2002 > 1,893.0 • 2001 > (1,014.0) • 2000 > 2,668.0

  11. Value or growth (Morningstar) • P/E • TTM > CSCO 22.8 IND 28.9 • P/B • TTM > CSCO 3.5 IND 3.3 • P/S • TTM > CSCO 3.9 IND 4.0

  12. Intrinsic value (Morningstar) • Current Price: $23.34 • Fair Value Estimate: $26.00 • Consider Buying: $18.20 • Consider Selling: $36.40 • 2 Yr. RSI (Yahoo!): 54.87 • Morningstar: 3 Star Rating • Insider Ownership Increasing > # of Sales Around $22-23 Recently • FCFE – $2.57 (RF > 4%; MRP > 10% = DR > 13.5%)

  13. CSCO now • In the process of incorporating four acquisitions started this quarter. • Enters new markets through acquisitions.

  14. 2-YEAR STOCK CHART (Yahoo!)

  15. COMPARISON WITH COMPETITORS AND S&P 500

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