Should You Buy Cisco Stocks

It has been said that the internet equipment market isn't going anywhere right now, yet Cisco seems to be doing a lot of business. So is now the right time to buy Cisco equipment stocks? Well it is true that within a single year a lot can change. Just last year Cisco was at the top of the tech sector and since 1993 they have acquired more than sixty companies and reached a market cap of $555 billion. However, as of this year the company is laying off 8,500 workers immediately after laying off another 3,000 in what has been two straight quarters of disappointing results in the companies earnings. Their stocks used to sell for $80 per share and now are in the low twenties with a market cap of only $100 billion. So what caused this difference and can it happen again?

While the downturn can be one cause since there are a lot of similar sized companies such as IBM and Microsoft who have done okay during the downturn. However, another cause of this problem can be attributed to the way the company has been managed. This is because Cisco doesn't grow in the way many companies do. The traditional way for a tech company to grow is by researching and developing new products before finding a market for the core products. However, Cisco has grown primarily through the acquisition of other companies. This is a fine process, but only when the economy is doing well. So during downturns the company is bound to face problems as seen in the drop of their stocks.

So the question that needs to be answered before you consider whether or not to buy Cisco stock is whether or not their reliance on acquiring new companies and not research and development can affect their comeback in the tech market. The answer to that can go both ways, but when you consider the heavy loss of their stock already it can be difficult for the company to recover. On the other hand if Cisco continues to grow and the market for tech helps strengthen the economy then there is a chance that Cisco's earnings can grow fast and rebound easily. So it is largely a personal decision for those who are considering buying Cisco Equipments stocks, it all depends on how much of a chance you want to take. When buying Cisco stock it is best to do so cautiously. They are a cheap buy, but you may not get much return for awhile to come.