Juniper Networks, Inc. (JNPR), Alcatel Lucent SA (ADR) (ALU): Core Routing To The Rescue?

Silent in the background of this saga is Cisco Systems, Inc. (NASDAQ:CSCO), the titan from the primordial times of networking. Core routers are not a giant piece of Cisco’s revenue anymore, though Cisco is the market leader. Cisco Systems, Inc. (NASDAQ:CSCO)’s focus is elsewhere, but its sheer presence makes it something to be reckoned with. Most of the interesting news regarding the company deals with small cells, LTE, and other mobile-related stuff, but it still maintains dominance in routers.

Cisco Systems, Inc. (NASDAQ:CSCO) extends beyond core routing, and I think it is better to look at the company as the financially-solid and entrenched market leader. It has such a large market share that it is using a defensive strategy, which is less interesting than the offensive approaches of the competition. Less interesting does not mean ineffective, and nothing will be easy for Alcatel-Lucent or Juniper Networks, Inc. (NYSE:JNPR).

Cisco Systems, Inc. (NASDAQ:CSCO) has not exactly been flying high, but this is because of the general malaise in networking. I think 2013 will be a good year for networking in general, because there was too little spending in 2012. I expect 2013 to be better if only slightly, but there will be growth in subsequent years. That might not translate into a higher share price for Cisco Systems, Inc. (NASDAQ:CSCO), but I am expecting the company to make gains before next year as witnessed by my 2014 calls.

Contrasting Cisco to the other two companies, it has increasing revenue and a fairly substantial upward sloping EPS. People are upset with the stock because it has not moved in a decade. If it does not move in 2014, I will roll my position to 2015. I do not think Cisco Systems, Inc. (NASDAQ:CSCO) will stay near $20 for much longer. The rest of the market made its move, now it is Cisco’s turn.

Conclusion

I have a position in Alcatel-Lucent because I think certain good news will send the company flying. It has been heavily beaten down, but the impetus of the decline was the worry of a liquidity problem regarding debt. The company has pushed back this problem, and it has time. That is not enough to send it up, nor is it deserving.

However, with more time and cash comes more flexibility. The company can start heading toward a profit, and signs of that should lead the shares higher. The reward for a successful turnaround is massive, the stuff of legend. However, the odds are against you, which is what makes it so rewarding.

The article Lagging Networking Companies Providing Opportunities originally appeared on Fool.com is written by Nihar Patel.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.