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Cisco Analyzing

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Cisco System, Inc
Cisco System, Inc

SMIF Stock Report Information Technology – Communication Equipment
Analyst: Thanh Nguyen

Date 12.04.13 Ticker: ●CSCO Recommendation: ● HOLD
Price: ● 21.24 (as of 12.04.13) Price Target: ● 21.74

Highlights

* HOLD Recommendation: Cisco’s expected revenues for the coming quarter will be down 8 to 10% because of weak demand in emerging markets. However, the company had high earnings, and was consistently increasing revenues over recent years. It is a large-cap growth company in the technology sector and is expected to outperform the emerging markets over the next years.

* Strong Financial Position: Cisco has solid fundamentals with consistent growth, high margins, and a strong balance sheet. Its gross profit margin is mostly higher than 60%, and blows away that of the S&P 500 average (around 44%). Since 2009, Cisco has kept increasing sales. It has a very strong balance sheet with more than $50 billion in cash and cash equivalents in 2013, which is higher than the total of debt ($42 billion). Besides, it has a good asset management, which has maintained to keep inventories low over years with an average of 2% of total assets. Further, Cisco commits to return a minimum of 50 percent of its free cash flow to shareholders in the forms of both dividends and share repurchases. Cisco generates a healthy amount of cash of about $10 billion to $12 billion annually in operating cash flow, it will have room to deliver both dividend increases and continue repurchase shares at a significant rate.

* Strong Market Position: Cisco has offered six kinds of products and services. Cisco generates 80 percent of its revenues from US and Europe, which are performing strongly. North America was the dominant market, growing 10.7 percent year-over-year. It had a dominant spot in the Ethernet switch market with a 62

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