3 Reasons Why Cisco Systems, Inc. (CSCO) Is Right in Betting On IoT

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Cisco Systems, Inc. (NASDAQ:CSCO) shares are one of the safe bet even during the downtimes because it will not have significant drop even when the broader index suffers. In the same way, the gain will also be limited but solid. That is mainly because of the dominance it enjoyed in the networking equipment and the timely shift towards moving the hardware business. For instance, the company is aware that businesses are moving towards cloud-based platform and Internet of Things (IoT). That is quite obvious since the enterprises and businesses are more focused on reducing the overall costs, and the cloud and IoT are the two things that play a key role in shifting their tactics. In the same way, the networking equipment maker is moving towards IoT as it believes the next big technology to offer a meaningful shift. Those, who failed to join the bandwagon, might get stranded. Let’s look at three reasons as to why the company is right in betting on internet-connected devices.

1.Big Opportunity

It is not just Cisco Systems, Inc. (NASDAQ:CSCO), which believes that IoT provides a big opportunity, but there are other tech firms too trying to get their slice of share. The key factor is that the internet connected market is a big one where everyone could manage to get their slice of share easily as long as it satisfies the users. The company believes that only one percent of the world’s devices are now connected to the Internet. Therefore, it bets there existed a huge opportunity to convince those non-connected devices to turn towards connected devices. As the year passes, there would not be any alternative but to join the web connected services as there is a threat of leaving behind the trend.

According to Cisco Systems, Inc. (NASDAQ:CSCO)’s estimation, the IoT and related devices are expected to deliver profit, as well as, savings of about $19 trillion by the turn of the year 2024. That is undoubtedly a big amount, which no one could afford to ignore. Of this, private sector is predicted to have profit or savings of approximately $14.4 trillion while the public sector is estimated to contribute $4.6 trillion. These were also backed by research organization data like Gartner, which expects about 21 billion connected devices by the end of the current decade, i.e. 2020. However, the company is more optimistic than the research firm by predicting 50 billion connected devices during the same period.

2.Range Of Industries

Cisco Systems, Inc. (NASDAQ:CSCO) believes that over 90% of the data was created in the last two-year period only. However, the company wants these data to be processed and sorted to make it a valuable one. The network switch maker estimated more than 2.5 billion GB of data has been generated every day and that the number is growing at a rapid pace. Therefore, the company wanted to make use of the data boom and did not want to lag behind. That meant the company’s change in tactics to shift its model towards web-related services would prove to be a game-changer at a time when its networking equipment was losing its earlier strength.

Once Cisco Systems, Inc. (NASDAQ:CSCO) found that IoT offered a plenty of opportunities, the company also started digging in as to which are the industries that have the potential to take advantage of the web-connected services. According to its estimations, manufacturing would either gain or provide opportunities to earn $3.9 trillion while retail sector offered $1.5 trillion since the online sales are yet to catch up with most of the retailers. Similarly, finance and IT sectors offer an opportunity of $1.3 trillion each whereas healthcare is predicted to provide $1.1 trillion opportunities. In the same way, education and oil and gas provided $900 billion and $504 billion potentials to earn.

3. Efficiency Level Improve

If these sectors offer such potentials, what is that they would get in return? Cisco Systems, Inc. (NASDAQ:CSCO) has answers for this. The company believes that if the web-related data could be harnessed to increase the bottom line in different industries even by a fraction of the small amount, it would lead to big savings for such enterprises in the long-term. The company also cited an example of the American Traffic Research Institution estimations that traffic delay in the United States cost trucking companies approximately $50 billion a year. The networking firm believes that even a one percent improvement in the efficiency level would free a maximum of $1 billion in a matter of two years.

Cisco Systems, Inc. (NASDAQ:CSCO) expects businesses and enterprises to take advantage of the IoT since it believes that if they failed to shift towards digital, then their business would be doomed. Also, data insights would become a key factor in revolutionizing the operations in different sectors and industries. It is a fact that there is a lot of hype surround the IoT. However, it is also the fact that more and more connected devices are coming to the market at a rapid pace. Gone are the days where watch is used only for the purpose of knowing the time. Now, with the IoT, it could accommodate apps to suggest health related data for the user to analyze and reach a conclusion. Similar is the case in respect of most of the devices. As the shift towards 4G gets accelerated, there would be more web-connected devices and the launch of the 5G would further accelerate the IoT devices adoption rate.

Conclusion

IoT is one area where there are plenty of opportunities for a number of companies since it provided different opportunities for different verticals. Cisco Systems, Inc. (NASDAQ:CSCO) has entered the business model at the right time and could take advantage of its leadership position in the networking space to strengthen its position and also add things to boost the adoption of IoT related devices in the upcoming years.

Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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