In the wake of Cisco’s latest earnings release, much has been written in the press about how Cisco has lost its touch and may be in danger of losing its market lead. I understand that uncertainty causes anxiety, however I believe that this latest whirlwind of opinion is a case of “Short-Term Think”, and like “Group Think” it can blind us to bigger and often more significant drivers. When one looks at Cisco as a whole and historical experience, one can reach a different conclusion.
We can all agree that Cisco’s results were disappointing and that they need to make significant changes. However, I believe this is a short-term situation more akin to a speedbump than a concrete barrier and that the company will get back on track in a few quarters.
- Even though some competitors gained share, Cisco is still the undisputed leader in most of the markets they participate in
- John Chambers is a savvy business leader who is willing to admit his mistakes and to make the difficult changes (they have already announced some first steps like dropping Flip)
- They are extremely well positioned in key growth markets like video, mobile and content delivery
- They have plenty of cash in their war chest to battle back
This is a 40,000-foot view, Cisco is huge company in many markets – so a detailed analysis would take 40 pages. However, given a long-term view and macro trends, betting against Cisco is likely to be a losing bet.
Cisco’s latest earnings are proving me right.
I should have added this disclosure back when I wrote it. I do not hold any positions in Cisco and do not plan on initiating any positions.