August 26, 2020

Cisco share – price plunge! A buy with a 3.3% dividend?

 


The Cisco share (CSCO) has after disappointing quarterly results lost 11 percent in one fell swoop. Sales fell by 9 percent compared to the previous year and, according to management’s forecast, should fall by a further 10 percent in the current quarter. It seems as if Cisco, despite the high demand for conference software such as WebEx, is more of a victim of the Corona crisis, instead of benefiting from the acceleration of digitization triggered by the virus.

 

On the other hand, the drop in the share price has driven the dividend yield to an attractive 3.3 percent, close to an all-time high. How to explain the weak numbers and whether the Cisco share is a bargain, you will find out in this share analysis. In addition, Cisco is one of the 20 stocks that we save each month in the starter depot. If our judgment is negative, the share is up for grabs.

 

The business model: This is how Cisco makes money

 

Cisco is one of the dinosaurs of the Internet. Its routers and switches have been ensuring that the flow of data from A to B works for decades. Internet hardware is accordingly one of Cisco’s core business. At the latest with the strategy of “intent-based networking” introduced in 2017“However, things started to change. Intent-based networking tries to master the increasing complexity of the configuration of the network landscape. To meet this challenge, Cisco simplifies the configuration with software. Instead of configuring the network landscape directly, very technically and specifically, the software is told in a much more general and at the same time simpler way what the network should look like. The software then takes care of the actual configuration. “Intent-based networking” also makes good business sense for Cisco. Compared to hardware, software scales better, achieves higher margins and can more easily ensure predictable sales through subscription models.

 

 

 

 

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