It’s no longer a real secret that Cisco Systems, Inc. (NASDAQ:CSCO) is on the defensive in the router/switching market — a market that thrust Cisco to the head of the class in the late 90’s, and a market that Cisco still mostly dominates. On the flipside, investors more than a little familiar with CSCO stock also know the company’s newest priority isn’t the kind of heavy-hitting revenue generator its networking wares used to be.
That new focus? Software, and the Internet of Things in particular … a party to which Cisco showed up late, and an arena that it still doesn’t look like it’s perfectly ready to compete in compared to other players like General Electric Company (NYSE:GE).
Fear not, however. Not only is Cisco equipped well enough to remain relevant in a future where IoT is everything, some subtle clues recently dished out by key executives suggests the company “gets it” to a far greater degree than anyone’s giving it credit for.
CSCO Picks the Low-Hanging Fruit
Think Cisco has already missed the Internet of Things boat? Cisco stock holders need not worry.
Maciej Kranz isn’t exactly a name that rings a bell among owners of CSCO owners. But, as Vice President of the company’s Corporate Technology Group, he’s well positioned — perhaps more so than some higher-level executives — to determine how Cisco gets from point A to point B.
And Kranz has an amazingly pragmatic view of where Cisco fits in the still-nascent IoT market.
In a corporate blog post penned in early December, Kranz opined:
“Successful IoT deployments do have at least one thing in common, however — they focus on solving the customer’s real business problems.
This third ingredient in my Recipe for IoT Success may seem obvious to you. Of course you focus on real problems! But you may be surprised at how often these efforts wander off track because someone is chasing a shiny new technology instead of starting with the customer — and the customer’s problems — at the center.”
It isn’t sexy. That’s the point. It’s marketable. Rather than swinging for the fences (and risking a whiff), Cisco is gunning to hit singles and maybe the occasional double to secure its place in the Internet of Things market.
With just a cursory glance at what Cisco has done thus far, and plans to do, owners of CSCO stock might not see such a practical bent to its efforts. Take a closer look though, beginning with Cisco’s answer to the need for Low Power Wireless Access hardware.
It wasn’t much of a consideration in the early era of IoT, but a great number of “connected” devices don’t need to frequently communicate with a network. They need to communicate infrequently, but reliably, sending a modest amount of data from remote locations. Water and gas meters are a couple of examples. Such devices require a new engineering model that allows for their nuances. Cisco’s solution, called LoRaWAN, provides a real solution to a problem many IoT operators didn’t foresee.
Cisco has already deployed some commercialized LoRaWan solutions, but has only scratched the surface of this market.
The company has also began the development of so-called “fog” computing solutions.
While the advent of cloud computing has been game-changing for the world, the cloud has already put enormous strain on cellular and wi-fi networks, gobbling up bandwidth that simply won’t be available in the foreseeable future. Yet, to halt such digital communication would be a step in the wrong direction.
There is a happy medium. Rather than wirelessly delivering every last shred of data available and processing it at a centralized location, why not handle some of that data-processing before needlessly uploading … everything? Such an approach will not only pre-solve many bandwidth/capacity problems, but may actually result in greater efficiency since data is processed at the same locale where it’s put into action.
Cisco is already deploying this sort of solution too.
Bottom Line for Cisco Stock
As was noted, neither of these highly-marketable initiatives (or any of the other unmentioned ones) are sexy by any stretch of the imagination. Indeed, the average consumer — and average investor — may not even realize these sorts of technological challenges exist, or are being addressed. They’re out there though, and while some companies are looking to develop products that create paradigm shifts, Cisco is quietly focused on coming up with solutions that are quickly becoming indispensable.
CSCO stock remains one of the market’s better picks, largely because the company knows exactly what the future holds and it’s not wasting time on hunting a whale it may never find. Oh, and the 3.4% Cisco dividend yield doesn’t hurt its appeal either.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.