Cisco (NASDAQ:CSCO) needed a spark to get Cisco stock moving again. The company’s December 11 announcement of its ‘Internet of the Future’ technology strategy could be just the ticket. 

Cisco shareholders have a year to date (through Dec. 12) total return of 8.6%, less than one-third the performance of the U.S. total market.

Although the announcement failed to move CSCO stock immediately, the news it would begin selling networking chips to the likes of Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) ought to persuade investors to give Cisco a second look. 

Here’s why.

The Big Picture

Rather than blather on about the various tech specifications of the company’s new products revolving around Cisco’s new Silicon One chip series, I’ll focus on how this will change the way it does business. 

While Cisco spent five years and more than $1 billion developing Silicon One, it is CEO Chuck Robbins’ vision for the future that makes the announcement so interesting (and possibly, down the road, extremely rewarding for shareholders). 

What’s changed?

Well, it will still sell lots of routers and switches, now it will also sell specialized networking chips to power the hardware for Microsoft Azure and Amazon AWS and other operators of big data centers. 

Customer Needs and Cisco Stock

But don’t think Cisco is suddenly entering the chip business to take on the Intel’s (NASDAQ:INTC) of the world. It’s merely responding to customer demands. 

“We didn’t say, ‘Let’s go build a semiconductor business.’ This was driven because our customers asked us to do this,” Robbins said. “We don’t have a big proactive strategy to build some large-scale semiconductor business.”

“I have to worry about what my customers want. I can’t worry about Wall Street, how they interpret this.” 

One thing is clear: the future internet is going to look a lot different than the internet of today. Robbins is merely trying to get a head start on the technology changes required to operate in a 5G world. 

“I think the bottom line is we have to embrace every transition, every trend that’s happening,” Robbins said. “If you sit around and deny and hope that things won’t happen, that’s when you die.” 

Perhaps this is a bit of blind optimism. Still, for those who’ve followed the company in recent years, its Silicon One architecture represents a significant change in the way it does business.

It is taking a significant risk that it will alienate some of the companies it’s already doing business with, including Intel and Broadcom (NASDAQ:AVGO). 

Too Much Power

Raymond James analyst Simon Leopold believes Cisco’s entry into the chip market comes as a result of concerns from Microsoft, Amazon, and the rest of the big data companies that Broadcom’s sway over this market was getting too powerful.

“We think Cisco aspires to address operators’ concerns about Broadcom securing too much market power,” Leopold said in a recent note to clients.

In recent years, Cisco’s acquisitions have pivoted it away from routers and switches toward software and services. The introduction of the Silicon One chip series would be an extension of this move. 

Now all Cisco has to do is execute its plan. 

The Bottom Line on Cisco Stock 

InvestorPlace contributors Ian Bezek and Josh Enomoto recently discussed why Cisco is a great value play.  

Bezek believes that except for sales growth, Cisco is an excellent investment. At 13 times forward earnings, Silicon One success could easily translate into a $15 bump over the next 12 months. 

Enomoto believes the only thing standing in the way of a higher Cisco stock price is the ongoing trade war with China. Also, election years tend to do funny things to an economy, so that has the potential to act as a significant headwind to its share price in 2020. 

However, there’s no question Cisco is one of the cheaper large-cap tech stocks available today. 

While I can’t tell you if the latest move from Chuck Robbins delivers the growth Cisco envisions, I can tell you that you don’t get ahead by standing in place. 

If you own CSCO stock, this latest move is a major positive for the company. That doesn’t mean it will translate into a higher stock price, but it’s a start. 

I’ll continue to watch Cisco’s progress with interest. 

At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.