Execution Remains The Key For Cisco, But Has Proven Elusive For Some Time

 

It’s no secret that Cisco’s (NASDAQ:CSCO) performance has left a lot to be desired for some time. While the stock has done a little better of late, the three-year, five-year, and 10-year comps are not so impressive relative to the company’s peer groups, nor the wider markets. There are a lot of moving parts to that performance, including a track record of M&A that leaves plenty to be desired, but execution seems to me to be the real key.

Opportunity has never been the issue for Cisco, and it isn’t today – Cisco is targeting attractive growth markets that can easily support revenue growth. That’s particularly true over the next 12-24 months, as spending from enterprise, webscale, and service provider customers on 5G, 400GE, Wi-Fi, security, and other areas of interest to Cisco should be quite strong. The question is whether Cisco can get its large array of ducks in a row and execute on that opportunity.

At this point I’m honestly surprised there isn’t more discussion around the idea of breaking up Cisco. Over the last few years the industrial sector has seen a marked shift toward the idea that companies must “earn the right” to remain conglomerates, and if they don’t, they should break up the business. That hasn’t been true for tech yet, but should Cisco’s execution not improve, I would expect that chatter to start. As is, Cisco looks a little undervalued to me, and were the company to really come through on execution over the next three-to-five years, the upside could be meaningful.

 

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Execution Remains The Key For Cisco, But Has Proven Elusive For Some Time