Is dividing Cisco (NASDAQ: CSCO) a good idea?

The recent news of Cisco (NASDAQ: CSCO)’s potential split has been met with a lot of concern and speculations. Cisco (NASDAQ: CSCO)’s process methodology has come under criticism for being too complicated that lack the ability to make quick decisions. This has had adverse effects on its growth in the compelling business environment. Cisco (NASDAQ: CSCO) stock rates have been lower than its competitors; the share price has ascended by a mere 7% in five years. On the other hand IBM (NYSE: IBM)’s stock rates have shown a 54% growth rate, Microsoft (NASDAQ: MSFT) has grown by 80%, and Dow Jones (DJW: DW25) has exceeded by more than 70% in the last five years. This comparison might not be the sole reason for the split, however, it can be one of the reasons for the impending divide.

The evolvement of Cisco (NASDAQ: CSCO)

Cisco (NASDAQ: CSCO) is a huge global network that provides services and products to communication and information technology industries. It has 8 divisions that cater to the design, manufacture and sale of various networking products and services. These divisions are: switching, Next-Generation Network Routing, Collaboration, Data Center, Security, Wireless, Service Provider Video and others. Cisco (NASDAQ: CSCO) is also one of the major companies that provide business avenues, switching of networks, and LAN markets. Over the last five years Cisco (NASDAQ: CSCO) has evolved and instead of selling individual products and services, it has changed its policy and sells packages with architecture and solutions. This has resulted in a changed market strategy. Due to this change Cisco (NASDAQ: CSCO) ended up introducing its 4 packages;

Cisco (NASDAQ: CSCO) ONE Essentials
Cisco (NASDAQ: CSCO) ONE Foundational Elements
Cisco (NASDAQ: CSCO) ONE Advanced Application Services
Cisco (NASDAQ: CSCO) ONE Advanced Security Services

Although Cisco (NASDAQ: CSCO) is still selling individual products to customers on demand, the company believes that bundled packages will automatically gain popularity with time. The new strategy aims at three enterprise territory of data center, enterprise WAN and access networks. The company is now planning to obtain a similar license for service providers as well.

Should there be a split?

If it was a matter of division of hardware and software components, it would have been easier and the division would have benefitted the company by growing its data center, cloud and other departments. However, this is a matter of combined architectures and the solutions. A potential customer might equally be interested in the security, software, along with cloud systems and the network switch when looking for a network solution. Apart from the customer’s interest, revenue and cost needs to be considered as well, as these are the main factors that that play an integral role in a company’s growth.

Another reason why Cisco (NASDAQ: CSCO) should not split is its loyal clientele. Since Cisco (NASDAQ: CSCO) has been a pioneer in the networking market, therefore it has developed a lasting relationship with its customers who are very loyal to the company.