Cisco Systems Charging Hard Against Competitors
Andrew Leckey

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About Cisco Systems Inc.

Ticker: CSCO

Exchange: Nasdaq

What does the company do? Data networking equipment and software

Financial report for fiscal year ended July 31:

Net sales $40 billion

Net income $7.76 billion

Q. I have 200 shares of Cisco Systems Inc. Will these be doing better soon? -- M.L., via the Internet

A. The world's dominant supplier of data networking equipment and software doesn't want to become just another mature company that's gradually losing market share to newer competitors.

In its quest for revenue growth, this cash-rich giant has been making acquisitions and launching product lines. The question is whether its aggressiveness may lead to future mistakes, such as paying too much for firms or rushing products to market before their time.

It most recently acquired:

-- The privately-held video software management firm ExtendMedia for an undisclosed amount.

-- Conferencing specialist Tandberg ASA of Norway for $3.3 billion.

-- Pure Digital Technologies Inc., maker of the Flip camcorder, for $590 million.

Also expanding its product lines, the company has launched a railroad station security device that detects safety problems quickly and informs passengers through public address. It has introduced the Icon phone headset; the business-oriented Cius tablet computer; and high-end video-conferencing gear.

Cisco Systems (CSCO) shares are down 9 percent this year following last year's 47 percent increase.

While earnings were up 79 percent in its fiscal fourth quarter ended July 31, that fell short of analyst expectations. In September, Cisco said it will institute the first dividend in its history, likely to be between 1 and 2 percent, with the exact amount determined in coming months.

The consensus Wall Street opinion on Cisco shares is "buy," according to Thomson Reuters, consisting of 18 "strong buys," 17 "buys," nine "holds" and three "underperforms."

Famous hard-charging leader John Chambers, its CEO since 1995 who added the chairmanship in 2006, holds about 23 million options and shares -- which keeps him in synch with shareholders. Skype SA recently snared a top Cisco executive in Tony Bates, who ran Cisco's enterprise, commercial and small business operation that produced products such as Cius.

Cisco has 70 percent of the switch market and is a clear leader in routers.

It also makes access equipment and network-management software for data communication between computer networks. New markets it has added include home networking, storage technology and Internet-based telephony. Significant competitors in various product lines include companies such as Juniper, Hewlett-Packard and China's Huawei Technologies.

Earnings are expected to increase 7.5 percent this year and 14.5 percent next year. The five-year annualized growth rate forecast of 13 percent compares to 16 percent expected for the communication devices industry.

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