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Is It Time to Take Another Look at Cisco?



Insiders paint a rosy picture of the future

Cisco Systems’ (CSCO) executives are painting a positive picture of the company’s future. At the World Economic Forum, Cisco Executive Chairman John Chambers talked about how he thinks Cisco would prosper under the Trump administration.

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Trump’s tax amnesty

Cisco is betting on Trump’s promised tax amnesty to help it repatriate the nearly $60 billion in profits it is holding in overseas accounts. US multinationals are holding more than $2 trillion in offshore accounts to avoid paying hefty repatriation taxes.

Trump proposed a corporate tax cut that would allow companies like Cisco, Apple (AAPL), Alphabet (GOOGL), General Electric (GE), and Microsoft (MSFT) to repatriate their offshore cash at a tax rate of only 10%, as opposed to the usual ~40%.

Investing in diversification

If Cisco can bring that money home without losing much of it to taxation, it could use it to bolster its revenue diversification efforts. Faced with stagnating growth in its core networking hardware business, Cisco is diversifying into software and security markets to unlock new growth.

The company recently acquired AppDynamics for $3.7 billion to strengthen its software category. AppDynamics is a provider of business intelligence software that companies use to track the performance of their apps.

Relaxed corporate regulations

Besides lowering the tax on repatriated cash, Cisco further hopes Trump will relax federal corporate regulations to encourage investment in the US, which the company believes would create a more conducive business atmosphere.

Cisco reports its 2Q17 earnings on February 15. The last time the company reported earnings, it beat consensus estimates, with revenue of $12.4 billion, topping the expectation for $12.3 billion, and EPS (earnings per share) of $0.61, surpassing the prediction of $0.59.


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