CSCO and ALU

Did Huawei steal Cisco's technology?
Do they pass information to the Chinese government on sensitive data from their routers?
They're all unfounded accusations to fight competition.

If the secrets can be stolen that easily, we have to blame Cisco for not protecting their secrets and we would have many companies like Huawei. Cisco is using this to protect its bidding from Huawei unfairly. This tactic works successfully in the U.S., but not outside the U.S. It is a case of its sales force in the U.S. does not care about the sales force in China.

The fact is there is no trap door to steal data from the network. If there is one, a good percentage (about 20%) of the global traffic has been routed via the Chinese equipment already.

It is a fact that companies spy against each other (same as countries), no matter it is a Chinese company or an American company.  If you believe CIA is just gathering information, you believe in fairy tales or your dumb nationalism covers your eyes. This will back slash Cisco when China stops Cisco from selling its products to China for the same reason.

Cisco does not have the technology in G4 LTE as the top three companies (ALU, Ericsson and Huawei) do. The stealer has better products than the stealee! Cisco has missed the opportunity to buy ALU when ALU was $1 per share. I hope they’re working on this important technology.

Cisco and its rival Huawei are riding on the economy. Many devices will be connected to the web. Cisco, Huawei and companies in this sector will all benefit. Singapore today provides a glimpse to the future. Every street has surveillance cameras which are connected to the internet via routers.  

I expect Cisco's stock price will fluctuate with today's range (as of 5-2013) and it will take off after two or three years hopefully when the global economy recovers. Huawei will be in better position in the long term as their research and manufacture costs are far lower than the U.S. Huawei's products are very competitive and already have captures good market shares outside the U.S. The margin of the industry will still be favorable. 

Afterthoughts

·         Cisco was up 10% in one day when she announced earning and boosting the dividend rate from 1.8% to 3.2%. The intrinsic value of the company is the same as the day before and dividend should not change its value by 10% in one day.

Dividend investors are willing to pay premiums on dividend stocks and some dividend ETFs have to buy them when they raise dividends above the average (about 2% for S&P 500 companies).

For the same reasoning, if a dividend stock cuts its dividend, their stock price will fall. As of 8/2012, it happens to several energy trusts. In the boom days of oil prices in 2007, two of my energy trusts were almost doubled and paid great dividends. When the oil prices fall, the reverse would be true especially with so many blind dividend chasers. These trusts require more effort in preparing tax returns unless you buy them in your retirement accounts.

Cisco should use its cash to buy companies like ALU, which would provide the state-of-the-art products they do not have and a customer base in the EU.

·         Every time I posted this article, it was deleted. Do you find this article offensive or wrong?

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