One old-school technology company has been making a few acquisitions in recent weeks. Rather than play to the company’s core advantages, however, the recent buys point to a new direction for the firm.
The direction is toward cloud-based communications. Specifically, this company wants smarter and faster customer engagement solutions, but that also includes interactive video, messaging, and voice channels. In short, a tech company best known from the 1990s is now working to outdo Zoom Video Communications (ZM) in video networking.
The company is no brash upstart. It’s Cisco Systems (CSCO). Best known as the developer of switches and routers, it’s been called the plumber of the internet. But its recent buy of U.K.-based IMImobile and now Slido, will enhance the company’s ability to deliver content as well as provide the infrastructure for it.
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Shares of Cisco have traded flat in the past year. While revenues are down overall, shares trade at just 14 times forward earnings.
Action to take: The acquisitions will likely allow the company to find a source of higher profit margins. That makes shares an attractive buy. Investors may like shares here, with a 3.2 percent dividend yield.
For traders, shares may be a bit weighed down by the acquisition costs, but should head higher over time. The July 2021 $45 calls are just a hair out-of-the-money. With a bid/ask spread of $3.05, they can still offer traders a potential double or better if the company can start profiting from its new acquisitions in the first half of 2021.