The novel-coronavirus pandemic has resulted in a major shift in the way many companies and organizations do business. Whenever possible, employees are now working from home. That has resulted in a rapid adoption of technology that supports remote work, including secure access, collaboration, and video-conference solutions. There are predictions that, after mandatory office closures end, the weeks spent on this forced “experiment” will result in working from home becoming much more widely adopted than before the pandemic. Cisco Systems (NASDAQ:CSCO) and CSCO stock are both poised to benefit from such a trend.
Could Working From Home Stay Much More Prevalent Than Before the Pandemic?
Networking Stocks to Buy: Cisco (CSCO)
Stanford University economics professor Nicholas Bloom is a longtime proponent of working from home. Speaking to the Harvard Business Review in 2014, he described the results when a Chinese travel website called Cript conducted a nine-month working from home experiment:
“Ctrip was thinking that it could save money on space and furniture if people worked from home and that the savings would outweigh the productivity hit it would take when employees left the discipline of the office environment. Instead, we found that people working from home completed 13.5% more calls than the staff in the office did—meaning that Ctrip got almost an extra workday a week out of them. They also quit at half the rate of people in the office—way beyond what we anticipated.”
That’s a strong case for the advantages to employers of allowing their employees to work from home. Still, many companies have remained skeptical about it. However, the coronavirus has resulted in a much larger-scale trial run.
Because of the coronavirus lockdown, millions of people are now working from home. The need to rapidly accommodate a remote workforce has IT security repercussions.
There is also a need to enable group collaboration. And keeping employees engaged and on focus has become a concern. Professor Bloom spoke to Stanford News about the importance of keeping workers engaged and collaborating while working from their homes during the pandemic:
“Phone calls make collaboration harder. You don’t know if anyone is really paying attention… While a video call could seem intrusive, it is essential for ensuring the attendees are paying as much attention as they would in a physical meeting.”
Cisco’s Remote Work-Friendly Solutions
The rush to adopt videoconferencing solutions resulted in Zoom Video Communications (NASDAQ:ZM) rapidly adding users. But it also exposed security flaws in Zoom’s offerings.
Alternatives like Webex — which is owned by Cisco — offer enterprise-grade security, eliminating the risk of “zoombombing” or worse. CSCO says it has seen record Webex use during the pandemic. While many consumers are undoubtedly using the free version of the service, if working from home becomes more common, some of those free trials are going to convert to paid usage.
In addition, Cisco owns Duo Security (which it purchased for $2.35 billion in 2018), a company that provides secure access to systems for remote users. That’s another critical piece of the working-from-home equation.
Infrastructure like network switches and routing hardware continue to generate most of Cisco’s sales. But the company is focused on selling more software and subscriptions. It wants software to account for 30% of its total revenue this year. A move toward more working from home would increase demand for Webex, Duo, and other software owned by Cisco, helping the company to achieve that target.
The Bottom Line on CSCO Stock
At $43.34, CSCO is clawing its way back toward pre-coronavirus levels. Even if the shares reach their pre-coronavirus ceiling of $50, the owners of the stock will make some profits.
Cisco is also one of the companies that stands to benefit from ongoing 5G adoption. That rollout has fallen out of the headlines lately, but it is on track to be the biggest telecommunications project of the decade. And as InvestorPlace contributor Josh Enomoto points out, Cisco stock also offers a generous dividend.
If working from home becomes a more popular option as a result of the coronavirus lockdown, paid subscriptions to Cisco products like Webex and Duo have the potential to boost Cisco’s revenue, improving its financial results. If that happens, CSCO stock may just break its $50 ceiling.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
