Cisco Systems makes another acquisition
Today’s buyStarent Networks (STAR). Price $2.9 billion in cash.
What does Starent do? It makes gear that lets wireless carriers deliver multimedia broadband to 3G and 4G smartphones. In this case multimedia means video.
That’s the big prize since Cisco Systems (CSCO) estimates that by 2013 about 64% of the Internet’s traffic will be video. After the acquisition Cisco will have a complete product line up for wireless operators, according to Wall Street analysts.
Verizon, the biggest U.S. wireless operator, is Starent’s biggest customer.
The deal comes at a hefty price–but it appears worth it. Read more
Update Cisco Systems (CSCO)
On October 1 Cisco Systems (CSCO) announced an offer to buy video conferencing leader Tandberg for $3 billion in cash. This is exactly the kind of new economy deal-making that drove me to add Cisco Systems to Jubak’s Picks on September 25.
The deal, which has been recommended by Tandberg’s board, will extend Cisco’s current video conferencing product line, heavily weighted toward high-end “telepresence” systems that sell for $150,000 to $200,000, into the larger conference room and desktop video conferencing market. The high-end telepresence market is about $500 million annually but the video conferencing market is about $3.5 billion, according to technology market watcher Gartner. The video conferencing market is growing by about 18% a year, Gartner estimates.
The deal will also bring Cisco network-based switching technology that will make it possible for videoconferencing systems made by different companies to work alongside each other. That technology and the buy itself will increase competition in this space between Cisco and Microsoft (MSFT). Read more
Sure can’t give Dell or Xerox points for originality. And these big acquisitions won’t do much for shareholders either
The stock market got all excited yesterday by big acquisitions announced by Xerox (XRX) and Abbot Laboratories (ABT). Xerox announced that it would buy Affiliated Computer Services (ACS) for $5.7 billion in cash and Abbot said it would buy the drugs business of Solvay (SVYSY) for $6.6 billion in cash.
That news helped stocks reverse recent weakness with the Standard & Poor’s 500 closing up 1.8% and the Dow Jones Industrial Average climbing 1.3%. The two deals, coming after news of acquisitions like Dell’s (DELL) $3.9 billion cash offer for Perot Systems (PER).
Now I can understand why the market as a whole would get excited at the news. Mergers and acquisitions push up stock prices. Dell, for example, has offered a 70% premium to buy Perot Systems.
But the recent trend in technology acquisitions worries me. The deals suggest a, what shall I call it, lack of strategic vision. At best we can hope that it’s just Xerox and Dell that are running in fear to strategies that have worked for competitors over the last decade. At worst, it’s a sign that the biggest companies in the sector are running out of growing room. Read more
Buy Cisco Systems (CSCO)
Remarks by Cisco Systems (CSCO) CEO John Chambers got me thinking about the potential for a new economy emerging in 2011 and beyond so, it’s only fair that I begin my next stock market portfolio with shares of Cisco Systems (CSCO). (See my 8:30 a.m. post today for more on why I believe we’re seeing the beginnings of the next stock market and what it might look like http://jubakpicks.com/2009/09/25/its-a-long-way-down-the-road-but-i-think-we-can-see-early-signs-of-the-next-stock-market-and-its-not-going-to-look-a-lot-like-the-last-market-or-todays-either/ .)
I’m buying these shares today for my 12-18 month Jubak’s Picks portfolio. Cisco is also a member of my long-term Jubak Picks 50 portfolio based on my book The Jubak Picks. Read more
To every earnings turn, there’s a season (with apologies to The Byrds)
The earnings seasons are lining up just right for technology stocks.
Looking backward that’s one reason that the sector has led the rally off the March 9 stock market lows. And looking ahead it’s one reason why you should be adding technology stocks to your portfolio as we approach the fourth quarter.
Investors spend a lot of time fretting about whether or not a company’s quarterly earnings beat or fall short of Wall Stret projections. A quarter where earnings come in 5 or 7 cents a share above expectations can wind up being called a “good” quarter even if revenue plunged.
But there’s an even more important Wall Street definition of good earnings, especially for a growth stock. Read more
