And the second most exciting part is the prices are pretty reasonable. In fact, if I were betting, it would not surprise me to see us move on the consumer side before you see us even move on some of the other areas,” exclaimed Chambers in the January 2009
conference call.
Despite its already large cash position, Cisco easily raised $4 billion in debt on Feb 9th, 2009, further substantiating the fact that Cisco is on the acquisition prowl. Companies rumored to be in the crosshairs are EMC Corporation (EMC), virtualization software company VMWare (VMW), Red Hat (RHT), NetApp (NTAP) and BMC Software (BMC).
Conclusion
Despite recent economic indicators beating estimates, the economy is still contracting, albeit at a slower rate than before. This has indicated signs of stabilization in the near future but the jury is still out on just when that will be. Even after the recent market rally, P/E ratios are still relatively low historically speaking; cheap valuations are still present as market consolidation continues to occur. Cisco has the fundamentals, management and courage to innovate to survive this cyclical downturn. With $33 billion in its pocket, Cisco will be making acquisitions, buying back stock or pouring it into R&D. All this boils down to one thing: maximizing shareholder value. I believe CSCO is a great buy at current levels and so does the Dow Jones Industrial Average.
- Jake Kimble
Disclosure: The fund the author is associated with is long CSCO and IBM.
