Maybe Cisco Systems (Nasdaq: CSCO) should have bought Sun Microsystems (Nasdaq: JAVA) before Larry Ellison's Oracle (Nasdaq: ORCL) signed on the dotted line. Cisco has already adopted Sun's most famous catchphrase.
You remember when Sun was shouting "The network is the computer!" from the rooftops? The company still submits to this credo, and Sun's cloud computing platform lives at network.com.
Now, listen to Cisco CEO John Chambers as he announced fourth-quarter results last night: "We see the network truly becoming the platform for innovation and new business models." Cisco is transforming itself into a "next-generation company" that uses networking-based "collaboration techniques" to create new opportunities.
Well, if anyone can do it, it'd be Cisco. The world leader in computer networking hardware sales generated $1.1 billion of GAAP earnings and $2 billion in operating cash flow in the fourth quarter of 2009, based on $8.5 billion of sales. I can think of small nations that would be happy with those numbers. Chambers noted an increasing order flow, and said that this quarter could turn out to be when "the tipping point occurred in our business."
And the company sure is working on that collaboration-based business model. For example, Cisco's TelePresence high-definition video conferencing platform is the basis of the Connected Care program, where Cisco connects distant locales and UnitedHealth Group (NYSE: UNH) provides doctors to conduct medical examinations over the network.
The TelePresence platform is gaining traction in the hotel business, too -- Westin and Sheraton parent Starwood Hotels (NYSE: HOT) is rolling out TelePresence-equipped conference rooms "in major cities around the world." Marriott International (NYSE: MAR) is doing the same thing in 25 American markets.
A tipping point usually marks the spot where a company's business hits critical mass and really takes off. So Cisco sees bandwidth-hungry video streams and other traffic feeding into a whole new reignition of the Internet. Feel free to invest in Cisco on that premise, since that kind of revolution would certainly fuel tons of networking hardware upgrades around the world, which would ensure brisk growth in Cisco’s core switches and routers business. Just don't forget that Google (Nasdaq: GOOG) also profits from the same improved network infrastructure and exploding traffic.
After all, if the network really is the computer, then Google is the big machine's processor -- arm in arm with Cisco.
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