Cisco's New Platform Adds To Long-Term Growth Story

| About: Cisco Systems, (CSCO)

Cisco (CSCO) announced that it will unveil Videoscape Unity, its new expanded video service delivery platform. The service enables media companies and service providers to deliver intuitive and multi-screen video experiences. Cisco has been trading at price levels that are favorable to its shareholders based on valuation. Below, I will explain how Cisco's track record of releasing successful delivery platforms has increased its revenues, and how this new video service delivery platform makes Cisco a strong buy at current price levels.


Cisco reported that its net income for fiscal 2012 was $8.0 billion, representing an increase of 24% from fiscal 2011. Its net sales was $46.1 billion, an increase of 7% year-over-year. The company's service revenues grew in fiscal 2012 to $9.7 billion. Earnings per share were $1.49, an increase of 27% compared to the prior fiscal year. The company generated $16.5 billion in cash from operations.

In its fourth quarter report, Cisco reported net sales of $11.7 billion, an increase of 4% year over year. Its net income was $1.9 billion GAAP, an increase of 56% year-over-year. Earnings per share for the quarter was $0.36 GAAP, an increase of 64% year-over-year.

Cisco reported first quarter 2013 net sales of $11.9 billion, an increase of 6%year over year. Net income was $2.1 billion GAAP, an increase of 18% year-over-year. Earnings per share was $0.39 GAAP, an increase of 18% year-over-year.

Why are Cisco's service platforms increasing sales?

The rise in revenue, according to Cisco officials, is due to the ability of its products to transform how people connect, communicate, and collaborate with each other. Due to the company's unique ability to turn information into new capabilities and rich experiences, businesses, individuals, and countries enjoy unprecedented possibilities, making them buy more of Cisco's solution platforms.

Cisco launched many solution platforms into the market in 2012. Cisco announced the Cisco Cloud Connected Solution, a new product that delivers cloud-enabled routing and wide area network (WAN) optimization platforms. The company and NBC Olympics provided a personalized Olympic experience at the 2012 Olympic Games to select users at event centers and accommodation through videoscape. Cisco and EMC (EMC) provided customers with choice and flexibility via a validated reference architecture and custom-design and pre-integrated converged infrastructure.

Cisco introduced videoscape distribution suit, an expanded and enhanced content delivery network portfolio, into the market. Cisco also introduced security solutions designed to fortify data centers against threats they face in moving toward more consolidated and virtualized environment. "As a result of our strong performance, continued execution of our plans to deliver profitable growth, and commitment to shareholders, we delivered revenue growth of 7% as well as a record year in revenues and earnings," said Cisco CEO, John Chambers. "Our strategy, delivering intelligent networks and technology architecture built on integrated products, services, and software platforms to fuel our customers' business is proving the right long-term strategy for our success."

"Our innovation engine, operational discipline, and ongoing evolution are enabling us to differentiate in the market," said Chambers.

The Videoscape Unity will include a multi-screen cloud digital video recorder that will allow customers to restart shows, catch up on past programs, and play back DVR-captured content from anywhere and on any screen. For the first time, video operators will have an agile, open software platform that goes above and beyond "TV Everywhere" services, enabling customers to quicken the delivery of multi-screen video experiences. It is understandable why Cisco is involved with the platform. Wireless is one of the fast evolving markets, and the company needs a head start over others in 2013.

Relating Cisco's launch of solution platforms in 2012 to its financial reports, it is clear that with them Cisco has improved consistently in comparison to the previous year. It is also noticeable that the company's growth rate in terms of cash flow and net income is impressive. Cisco is operating at an efficient level.


How has it been performing with the rest of the companies? With a gross margin of 0.61, compared with 0.31 for Alcatel-Lucent (ALU), and 0.23 for Hewlett-Packard (NYSE:HPQ), and earnings per share of 1.55, compared with 0.49 for Alcatel Lucent, -6.41 for Hewlett Packard, 1.47 for Dell (DELL), and 0.36 for Juniper (JNPR), Cisco seems to be ahead of the others. And it must be noted that Cisco is supposedly the biggest player in the niche it operates in.


Looking at its successive deployment of solution platforms and the improving margins, I can safely say that Cisco is a good buy at the moment.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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