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Stock Strategist

Cisco's Narrow Moat Provides Competitive Firewall

We expect the firm to remain a strong competitor for many years to come.

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Intangible assets in the form of brand equity, scale advantages, and meaningful customer switching costs give  Cisco (CSCO) a durable competitive advantage in its core markets of switches and routers. We expect the firm to remain a strong competitor for many years as it adapts to shifts in networking technologies while expanding the range of products it offers to address ongoing cloud and software-defined networking adoption.

Cisco's dominance in data networking is clear. Its Ethernet switches and routers, which move data along local computer networks, are considered the gold standard by network managers. The firm enjoys a 15%-plus market share advantage in the number of port shipments over HP, its most significant competitor. Cisco is viewed as a premium provider, and as such, it extracts 50% more revenue per port than HP. Cisco's carrier routers, used by telecom and cable service providers to move data across long distances, are also the market favorite. While Huawei and  Nokia (NOK) have made recent inroads, Cisco still maintains a healthy global market share.

Ilya Kundozerov does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.