Cloud computing is a model for enabling convenient, on-demand network access and allows users to store files and software remotely, offering benefits such as lower costs, convenience and faster deployment. The tech powerhouse Cisco (News - Alert) Systems, Inc. is considered well-positioned by investors to cash in on strengthening demand for networking gear fueled by rapid growth in rapid Internet traffic as well as the shift to cloud computing.
Enterprises, service providers, small businesses and governments are looking for cloud solutions to solve some of their biggest business and technology challenges. A solution to these challenges requires an approach that fully integrates the three pillars of cloud: cloud applications and services, data centers and networks.
Analysts also point to signs of a rebound in demand in telecommunications gear in the second half of the year, after a period of slower growth.
Cisco’s stock has jumped 15 percent in the last two weeks and it lately traded up 3.2 percent to close at $17.70 in Thursday dealings after the San Jose-based tech bellwether scoring upgrades from Goldman Sachs and Piper Jaffray.
Cisco’s stock has risen more than 10 percent just this month, the best among the 30 components of the Dow Jones Industrial Average and has posted the biggest month-to-date gain among large-cap firms in the S&P 500 index. The stock is on track to end the week with a gain of more than seven percent.
A major factor behind Cisco’s gains is the company’s recent restructuring aimed at reducing costs and maintaining a leaner and more focused organization — an effort that analysts say is clearly paying off.
“Cisco was one of the first to call the darkening macro environment,” Caris & Co. analyst John Slack said in a note to clients. But a combination of “solid execution and conservatism should allow the shares to recover with service provider and IT spending in the back half of the year,” he added.
At Piper Jaffray, analyst Troy Jensen raised Cisco’s rating to overweight from neutral with a $22 price target, saying channel checks indicate that the company will meet or even slightly exceed revenue expectations when it reports financial results for the fourth quarter of fiscal 2012.
The results are due out Aug. 15 after the close of U.S. trading, Cisco said.
“Tight cost controls should drive better-than-expected earnings-per-share results,” Jensen wrote. “We believe Cisco’s fundamentals are inflecting positively.” Goldman Sachs analyst Simona Jankowski added Cisco to the broker’s conviction buy list with price target of $24 – implying potential upside of about 40 percent from Thursday’s closing price.
“We believe its fundamentals are inflecting positively, with both our recent IT survey and our just-published channel survey pointing to stronger-than-expected growth in enterprise networking, and switching in particular, as well as to a stronger competitive position for Cisco,” Jankowski wrote.
Cisco offers a wide variety of products and services, from data center management and automation, routers and voice and unified communications to security services, customer collaboration services and carrier Ethernet services. For all Cisco equipment, SMARTnet is the technical support service for a customer’s every need.
XS International is a provider of an alternative SMARTnet maintenance solution, offering contract flexibilities, simple contract management, hardware and software support beyond Cisco End-of-Life or End-of-Service and customer tailored reporting that Cisco SMARTnet doesn’t offer. So while it may be a no-brainer to choose Cisco equipment, you might want to think twice about which support system you choose for your top tier technical equipment.
To learn more about XS International and its alternative to Cisco SMARTnet maintenance contract, click here.
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Edited by Braden Becker