Cisco analysis

Final Paper

July 6th, 2010
Liliana Azuara Patricio Elizondo Akim González 457179 588726 371282

Index
           Executive Summary Brief Outlook of CISCO Corporate Governance General Economic Analysis Industry Analysis Competitive Analysis Financial Analysis Value Creation Analysis Recommendations References Appendix
– Appendix 1: Balance Sheet – Appendix 2: Income Statement– Appendix 3: Cash Flow Statement – Appendix 4: Liquidity – Appendix 5: Profitability – Appendix 6: Leverage – Appendix 7: Efficiency – Appendix 8: Growth Sustaintability – Appendix 9: BETA – Appendix 10: Market Value – Appendix 11: Value Creation – Appendix 12: Statistics – Appendix 13: Competition

2 3 4 5 6 7 8 14 15 16
16 17 18 19 20 21 22 23 23 26 27 28 29

2

Executive Summary
Cisco Systems, Inc. is the worldwide leader in networking for the Internet.  CAGR 2005-2009 for sales has growth at 10%.  CAGR 2005-2008 for income has growth at 9%.  Cisco has a strong liquidity position, current ratio on 3.24 for 2009.  It has been growing through successful acquisitions that creates value for the company.  Its WACC has been decreasing in this last 5 years 4.39% for 2009. Its gross margin has maintained above 60% over the last 5 years.  Operating margin CAGR is one of the highest for the last 5 years: Cisco 24%, HP 7.6%, Juniper 6.07%, Industry 10%.  Growth rate of EPS over a 5 year period for Cisco is 8.27 vs 7.2 of the sector and -1.46 for Juniper. Cisco has a sustainable growth.  Their main competitors are Juniper and HP, however companies like Alcatel andHuawei are trying to get market share by positioning in with low cost products.  We strongly recommend investing on Cisco:

– Economic Value added is positive and growing: ROIC/WACC CAGR 2005-2009
– Solid position of cash flows – Market opportunity and growth

7.11%

3

Brief Outlook of CISCO
              Cisco Systems, Inc. Cisco hardware, software, and service createInternet solutions allowing individuals, companies, and countries to increase productivity, improve customer satisfaction and strengthen competitive advantage. CEO : Carol Bartz Chief Executive Officer, Yahoo! Inc. Foundation: Cisco was founded in 1984 by a group of computer scientists from Stanford University. Incorporation: Cisco was incorporated on December 10, 1984 in California. Stock Symbol:NASDAQ: CSCO Industry: Networking & Communication Devices IPO: Cisco went public on February 16, 1990 at a split-adjusted price of about 6 cents. Employees: As of the end of January, 2010 Cisco has 68,574 employees worldwide Corporate Headquarters: San Jose, California, USA Worldwide Locations Latest Acquisitions: 14 in the last 3 years Market Opportunities: Cable, Data Center, Software, WebServices, Optical, Consumer, Security Countries: world wide penetration, major markets USA & Canada (Figure 1) Business Partners: Accenture, Fujitsu, Microsoft, Intel, Nextel, Nokia, SAP AG, Siemens, Oracle among others. Cisco Total Return (Figure 2) is positively related to the Information Technology Industry, recessions and weak economy affects growth and revenues Figure 1 2009 Net Sales (36,117MUSD)
EPS Shares Outstanding Beta 1.18 5.71 B 1.23 4

Figure 2

Table 1 (Yahoo Finance)
Stock Price Market Cap P/E 22.91 127.5 B 18.86

Corporate Governance Policies
I. Board Composition
A. Size of the Board: The Board will be not less than 8 nor more than 15 directors. B. Majority of Independent Directors: Not currently employees and will otherwise meet appropriate standards ofindependence. C. Management Directors: CEO will be nominated annually to serve on the Board. D. Chair; Lead Independent Director: The Board will periodically appoint a Chair. E. Selection of Board Nominees: The Board will be responsible for the selection of nominees for election or appointment to the Board. F. Board Membership Criteria: Nominees for the Board should be committed to enhancing long-term...