The global enterprise technology sector has been in somewhat of a rut lately as Europe stagnates, emerging markets slow, and the U.S. government tries to slash spending. 

All this has resulted in relatively slow growth for the world's dominant IT franchises like Cisco Systems (NASDAQ:CSCO)Oracle (NASDAQ: ORCL), and IBM (NYSE: IBM) as companies large and small sit on their idle cash rather than delaying critical investments like IT spending. However, it's not all doom and gloom.

Yesterday, Cisco knocked its most recent quarterly earnings out of the park, rejuvenating investors' hope and driving a huge rally in its share price. However positive the earnings report was, it only explains a fraction of the overall Cisco investment thesis. To better inform investors about three of the most critical areas to watch for Cisco, the Fool has included below a key portion of its new premium research report on the networking giant. We hope you enjoy it!

3 reasons to buy

  • The coming traffic spike. More of us are logging on to perform complex business tasks during the day and then stream movies at night. Mobile devices, too, are adding traffic at an alarming rate. Cisco's own estimates say device traffic is on track to rise 18-fold from 2011 to 2016. A massive Internet build-out seems inevitable.
  • Whole infrastructures are attractive. Thanks to years of acquisitions, Cisco offers a comprehensive portfolio of gear and services for those with online businesses. "Whole" platforms have a long history of serving markets very well.
  • A cheap valuation. Shares of Cisco are priced for near-zero growth. Only the most apocalyptic of pessimists could take that sort of valuation seriously, especially when you factor in how fast Internet traffic is growing.

However, we also touch on the possible downsides facing Cisco as a company, which we discuss in our ticker report.

3 reasons to sell

  • A history of inconsistent returns. Cisco may be well positioned as a large-scale supplier of networks, but growth depends entirely on buying the right bolt-on businesses at the right prices. Management hasn't always done that well.
  • Hungry, aggressive competitors. In particular, F5 Networks and Riverbed Technology have made a good living carving out specialty roles for optimizing network performance. Cisco has yet to find a way to unseat either company, and both are working on ways to take revenue from their larger rival.
  • The rise of cloud computing. Infrastructure outsourcing options from the likes of Amazon.com and Rackspace Hosting have reduced the need for companies to buy expensive routing and switching gear from Cisco. Management has compensated for this by diversifying the business, but the point remains: grabbing growth isn't as easy as it once was.

Fool contributor Tim Beyers owns shares of IBM. The Motley Fool owns shares of Cisco Systems, Oracle, and International Business Machines. Motley Fool newsletter services have recommended creating a synthetic long position in International Business Machines. The Motley Fool has a disclosure policy.
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