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Cisco Continues to Make All the Right Moves

If questions remained regarding Cisco's (Nasdaq: CSCO  ) ability to outperform analyst and shareholder expectations, its earnings announcement from a couple of weeks ago silenced them in a big way. Cisco's year-over-year operating income, net income, revenue, and cash from operations are all through the roof. To top things off, CEO John Chambers and the team finally dug into the $48 billion in reserves and increased the dividend yield to an impressive 2.89%.

Rather than congratulate itself on a stellar quarter, Cisco is continuing its push for significant growth in key business areas. In conjunction with previously announced cost-saving initiatives, the moves will keep investors cheering well into 2013.

The latest
The Aug. 27 press release announcing an expansion of the partnership between Cisco and VMware (NYSE: VMW  ) is a great strategic business move. Cloud technology is the future of computing, and $39 billion VMware is one of the leaders in the industry. Cisco's no slouch when it comes to the cloud, either. It offers customers a suite of Cisco-specific solutions, including SecureX, data loss prevention, and secure mobile solutions.

Together, Cisco and VMware will make capital investments for new solutions, develop joint engineering teams to expand services, and provide additional expertise. The more comprehensive the cloud infrastructure, data centers, and networking capabilities -- the better, and Cisco now delivers just these types of solutions.

Though not on the same scale as the Cisco/VMware strategic partnership expansion, Cisco announced the signing of an agreement on Aug. 28 with Alstom Grid. Alstom provides utilities around the country with digital substation automation solutions. To limit downtime and increase safety, Cisco's part of the bargain provides improved digital security, Internet communication improvements, and helps modernize electrical utilities nationwide.

Going forward
With the 10% appreciation in stock price since the Aug. 15 earnings announcement, the question of Cisco's relative value is a legitimate one. Compared to others in the industry, particularly in light of the recent news, Cisco has been good for existing shareholders. For new investors in search of a solid long-term opportunity, you still have time.

At $31.5 billion in market cap, Swedish-based Ericsson (Nasdaq: ERIC  ) is closest to Cisco in size. But even then, it pales in comparison to Cisco's $103 billion valuation and diversity of product lines. Motorola Solutions (NYSE: MSI  ) and Juniper Networks (NYSE: JNPR  ) are smaller still, and lack key growth opportunities including data centers and cloud computing solutions.

Of the four, only Ericsson's 3.54% dividend yield beats the new-and-improved 2.89% Cisco now offers shareholders. As for financials, Cisco dominates value measures in several areas. Cisco's P/E of 12.94 wins the day. Just as important, key financial components used to compare management's effectiveness, such as return on assets, operating, and net profit margins, are all dominated by Cisco.

Cisco continues to outperform both analyst expectations and its competition, yet remains one of the best values in the industry -- a perfect scenario for investors. Now toss in a dividend yield of nearly 3%, and Cisco becomes a growth and income opportunity.

But the best news for investors goes beyond Cisco's impressive financial results and relative value. Management's aggressive steps to continue focusing on long-term initiatives, like cloud computing, set Cisco apart from the rest.

Cloud computing isn't the only fast-moving technology sector. For a look at another opportunity -- this one in mobile computing -- review our special free report: "The Next Trillion-Dollar Revolution."

Fool contributor Tim Brugger currently holds no securities positions, including any mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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