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Cisco - Running out of Steam Product Image

Cisco - Running out of Steam

  • Published: February 2013
  • 35 Pages
  • Indigo Equity Research

Cisco - Company Profile - Running out of steam

A fundamental problem is slowing organic revenue growth due to weak networking. Since 2011, Cisco has turned itself around; re-organised, cut costs & raised productivity. EPS, revenues & margins have benefitted from acquisitions and diversifying into services, software and other products (eg. video, collaboration, …) and lower tax rates. These drivers have some momentum left, but are running out of steam. Cisco's ultra low tax rates look unsustainable and EBIT margins are at the top end of their historical range. Valuation multiples have rebounded from historical lows and now have little upside left. In summary, we have modest expectations for Cisco due to a lack of enough catalysts.

Mixed 2013 Q2 results

- Slowing organic growth and margins fell slightly.
- Revenue growth continues to slow across most divisions.
- Cisco is hostage to the macro environment which remains weak. But guidance was cautiously optimistic.
- We estimate organic revenue growth at c. 3%, excluding acquisitions (eg. NDS).

Investment Thesis & SWOT Analysis
News Flow - Significant Recent Events

Industry & Company Analysis
Overview of the Networking Industry
Company Overview
Management, Executive Compensation & Board
Strategy, Acquisitions & History
Key Divisions
Other Products
Snapshot - Last 12 Months
SWOT Analysis

Financial Results Analysis
Profit & Loss Summary
Revenue Analysis by Division
Revenue & Gross Profit by Product
Revenue & Gross Profit by Region
Expenses Analysis
Free Cash Flow Analysis
Balance Sheet Analysis
Return Analysis
Unusual Items

Valuation
Valuation Multiples
Historical Valuation Multiples
Fundamental Valuation of Cisco Systems
DCF Valuation & Sensitivity Analysis

Additional Industry Analysis
IT & Networking Industry Key Trends
IT & Networking Industry Key Trends (details)

Financial Tables
Quarterly Financial Accounts
Annual Financial Accounts
Revenue & Product Order Data
Revenue & Gross Profit by Region
Revenue & Gross Profit by Product

Explanations and Definitions
Legal and Important Information

List of Tables
Financial Tables
Quarterly Financial Accounts
Annual Financial Accounts
Revenue & Product Order Data
Revenue & Gross Profit by Region
Revenue & Gross Profit by Product

List of Figures
Financial Results Analysis
Profit & Loss Summary
Revenue Analysis by Division
Revenue & Gross Profit by Product
Revenue & Gross Profit by Region
Expenses Analysis
Free Cash Flow Analysis
Balance Sheet Analysis
Return Analysis
Unusual Items

Valuation
Valuation Multiples
Historical Valuation Multiples
Fundamental Valuation of Cisco Systems
DCF Valuation & Sensitivity Analysis

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