Cisco Well Positioned To Take Advantage of Next Corporate Upgrade Cycle

The year to date chart for Cisco (CSCO) more closely resembles a cardiogram than a stock chart, but it definitely deserves a closer look. Cisco Systems is well positioned to take full advantage of the next corporate upgrade cycle, has great growth potential within the consumer market and may even benefit from the Apple (not Cisco) iPhone.

The stock, trading at 17 times next year’s earnings, is on sale. Cisco’s Market Cap is five times that of Avaya (AV), Juniper Networks (JNPR) and Nortel (NT) combined and is trading at a lower PE multiple than any of them.

With its TelePresence technology and acquisition of WebEx, Cisco is able to offer corporate clients value in a wide variety of areas within their organization from internet routing to IP telephony to the conference room. Integrating multiple Cisco solutions with the client’s infrastructure makes it difficult and costly for Cisco to be replaced by competitors.

Now that VoIP is becoming mainstream, with most major cable providers offering IP phone service, Cisco has excellent growth opportunities in the consumer segment with their IP phones. As the VoIP market matures, Cisco would be able to take advantage of video conferencing for the consumer.

The future of the iPhone may be a hotly debated topic but Apple will probably sell a lot of them, with AT&T (T) being the sole carrier for service. AT&T and Cisco’s strategic alliance may benefit Cisco with the success of the iPhone and increased subscribers and subscriber services for AT&T.

Since the end of May, Cisco has been trading right around its 200 day Moving Average. The last time it traded around its 200 MA was August of ’06 when the price began a long climb upward from 19.50 until maxing at 28 by Jan ’07.

Even though it may continue to be range bound for a little while longer, I believe that an explosive breakout to the upside is in the near future.

CSCO 1-yr chart

Disclosure: none