The year is nearing its end, and now's a good opportunity to look at what happened throughout 2012 to the stocks you follow. If you know the important things a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it really deserves a spot in your portfolio.
Today, I'll look at Cisco Systems (CSCO +0.76%). As a member of the Dow Jones Industrials (^DJI 0.26%) and the true pioneer in the networking industry, Cisco has been a leader for years. But increased competition has threatened its edge, and up-and-coming rivals have taken substantial bites out of Cisco's business. Let's lool at what moved shares of Cisco this year.
Stats on Cisco Systems
|
Year-to-date stock return |
7.4% |
|
Market cap |
$100 billion |
|
1-year revenue growth |
6.8% |
|
1-year profit growth |
31.9% |
|
Dividend yield |
2.9% |
|
CAPS rating (out of 5) |
***** |
Source: S&P Capital IQ.
Why's Cisco up this year?
This time last year, Cisco was facing significant problems. Competitors Juniper Networks (JNPR +0.00%) and Hewlett-Packard (HPQ 0.11%) had aggressively moved against Cisco throughout the IT space, challenging the company at a time when spending from its government customers was down. Early in the year, Cisco blamed some of its earnings woes on Europe's economic problems, but Cisco's failure to execute showed up with lengthening sales cycles, making it reasonable to conclude that part of Cisco's problem was internal.
But during the second half of the year, Cisco has recovered substantially. On one hand, it has made painful cost cuts, announcing a plan to lay off 1,300 employees over the summer. Yet the company boosted its quarterly dividend by 75% in August, accompanying a much better-than-expected quarterly report. With its $45 billion in cash and short-term investments, Cisco has plenty of financial resources to pay dividends yet remain in a strong position to make whatever strategic moves it wants.
Most recently, Cisco's report in November showed substantial strength in wireless equipment, specialized networking gear for digital video streams, and its Unified Computing System. CEO John Chambers said he wants to beat IBM (IBM 0.58%) as the all-industry provider of IT. With many of its important segments starting to hit on all cylinders, Cisco looks primed to finish the year on a positive note and head into 2013 with tailwinds at its back.
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