Cisco Shows Strong Growth in the US Market
Why Cisco's Stock Increased by 10% in February (Part 5 of 20)
Cisco’s growth from the US market is accelerating
Cisco (CSCO) derives more than half of its revenues from the US market alone, making it the most important market for the company. In terms of growth also, Cisco’s year-over-year revenue growth rate from the Americas (the United States and Latin America) was 10% in fiscal 2Q15. This was Cisco’s highest year-over-year growth rate over the last few quarters, as the chart below shows. Specifically, the company’s revenue from the US market grew by 7%, while the growth in the Latin American market was 12%.
The main reason for this return in growth was the growth in the company’s US government and enterprise clients. The revenue growth from the US public sector was 17%, while the US federal government grew by 23%, and US state and local governments grew by 8%. The growth from the US enterprise segment was a bit slow, at 3%, mainly due to the timing of very large deals, as Cisco’s management explained in the company’s latest earnings call.
A robust US economy is benefiting Cisco
The robust US economy (SPY)(IVV) is one of the reasons for Cisco’s better showing in the Americas segment. The IMF (International Monetary Fund) and the World Bank both have high hopes for the pace of US economic growth. The Leading Economic Index (or LEI), a weighted gauge of ten indicators designed to signal business-cycle peaks and valleys, has also been increasing over the last few months.
Cisco has also gained through a number of strategic partnerships. The partnership with EMC (EMC) and VMware (VMW), named VCE, has been a success. Cisco has also partnered with NetApp (NTAP) to sell products under the name FlexPod. Last year, it also partnered with Microsoft (MSFT) to deliver integrated solutions for cloud and data center markets.
Browse this series on Market Realist:
