Is Cisco Systems a Risky Investment?

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With shares of Cisco Systems (NASDAQ:CSCO) trading around $21, is CSCO an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Cisco Systems designs, manufactures, and sells Internet protocol-based networking and other products related to communications, and provides services associated with these products and their use to information technology industries worldwide. The company provides a line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Its products are designed to transform how people connect, communicate, and collaborate. Cisco operates in five segments: United States and Canada, European markets, emerging markets, Asia Pacific, and Japan.

Cisco Systems is following in rival International Business Machines’ (NYSE:IBM) footsteps and investing more than $1 billion in its cloud computing offerings over the course of the next two years. IBM announced that it would make a similarly large investment in the technology earlier this year and purchased cloud computing company Cloudant Inc. last month. Both companies still lag behind industry pioneer Amazon.com Inc.’s (NASDAQ:AMZN) Amazon Web Services. Like IBM, Cisco is turning to the technology as hardware sales have plummeted and companies increasingly prefer to invest in cloud-based servers rather than maintaining their own hardware. Cisco’s past few quarterly results have shown the drag this shift has had on a company that is primarily known for its hardware. Cisco says the $1 billion investment will go toward building more data centers that companies can access to do tasks like store information or allow employees to access their work computers from home.

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