Cisco (NASDAQ:CSCO) stock has lived up to its reputation as a stodgy tech company in recent years, posting gains of 35% since mid-2010 while the Nasdaq has more than doubled with a 140% climb.
Zoom in on the year-to-date period and CSCO stock is actually sitting slightly in the red while the broader basket of tech stocks has posted 4% gains — much better than the flat S&P 500.
Despite the fact that Cisco stock is more or less sitting still, the company — between its upcoming CEO switcheroo and a summer shopping spree — is doing anything but that.
CSCO Continues Acquisition Trend
Just this week, Cisco graced us with its third “intent to acquire” announcement since the beginning of June. The latest news: The networking giant is dropping $139 million for a cloud company called MaintenanceNet.
Once again, this comes right on the heels of two other recent big-name purchases for the tech giant, on top of being part of a broader trend of consolidation in the tech industry.
MaintenanceNet, as Cisco’s announcement of the upcoming purchase put it, “provides a cloud-based software platform that uses data analytics and automation to manage and scale attach and renewals of recurring customer contracts,” particularly for the low-dollar, high-volume portion of its customer base.
The company’s blog explained the significance of this software addition in simpler terms: “As more of the business models in IT shift to a recurring revenue model for products, software, solutions and services, the ability to easily implement, track, manage and renew contracts is critical to maximizing revenue potential.”
Cisco Stock Unmoved by Acquisition News
In early June, Cisco made headlines by making a move on Piston Cloud, a privately held Openstack product company that provides software enabling streamlined operational deployment of large scale distributed systems. After the cloud acquisition came one focused on the Internet of Things.
In late June, Cisco made a move on OpenDNS, a privately held security company that offers advanced threat protection across devices and locations. At the time of that announcement, Cisco wrote: “Security, cloud and software are critical components of Cisco’s strategy” — and this week’s news rounds out that trifecta.
“The three recent acquisitions highlight different areas of technology that Cisco is trying to build, but you can see how they fit together.
“Cisco made a name for itself in networking and has always believed that the network was crucial to connecting the cloud to intelligent nodes at the edge of a network.”
Outlook for Cisco Stock
Cisco is currently expected to grow its earnings by about 9% per year for the next five years– significantly less than the 17% on tap for the sector on average, but not bad for a company with a market cap of almost $140 billion.
Strategic acquisitions, like the three the company has made in the recent weeks, could potentially beef up that growth rate. Plus, Cisco has more than enough cash to play with — more than $54 billion in cash and investments.
But keep in mind that such a market cap and bank account can be a double-edged sword for Cisco stock. The company didn’t announce how much it paid for Piston Cloud or OpenDNS. Hypothetically speaking, we could round up and stick a $140 million price tag on each of the three companies … and the grand total would be just $420 million — not even 1% of that cash pile.
With that in mind, these acquisitions might make for nice headlines and nice strategies … but they’re a drop in the bucket for Cisco stock at this stage in the game. Don’t necessarily bank on Cisco banking larger stock gains because of them.
Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Business Insider, MSN Money and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she did not hold a position in any of the aforementioned securities.