The recent deal between Cisco Systems (NASDAQ:CSCO) and Acacia Communications (NASDAQ:ACIA) appears to be going through, and I think this acquisition provides more in the way of long-term growth for Cisco shareholders. I think Cisco is a stock that has underperformed somewhat relative to its growth potential of late. I do see strong secular tailwinds propelling this stock forward for a very long time (such as the 5G rollout that has just begun), however this is a pretty boring stock in a world filled with exciting opportunities right now.
Boring is exactly what I think every investor needs right now. Cisco is a fundamentally-sound business providing critical infrastructure to keep the North American technology sector up and running. This Acacia acquisition provides Cisco with optics capabilities the company previously did not have. This is a $4.5-billion deal, so it’s not small by any means. This offer was actually almost doubled from a previous offer mid-last year of $2.6 billion, for a reason. Optics is where a tremendous amount of future growth is expected to materialize. Optics are key in expanding transmission speeds, particularly within data centers.
The amount of data we’re all using isn’t going to ever take a breather, in my view. Data consumption is likely to continue to increase at its torrid pace of the past, supported by 5G technology and cloud computing technology which has further accelerated this trend. Right now, Cisco is my favourite way to play the infrastructure space behind these secular trends.
Invest wisely, my friends.
