Last Thursday Cisco (CSCO) payed approximately $590 million in stock in exchange for all shares of Pure Digital. In addition, Cisco provided up to $15 million in retention-based equity incentives for continuing employees. The acquisition is subject to various standard closing conditions and is expected to close in the fourth quarter of Cisco’s fiscal year 2009. It seems that Goldman Sachs decided it likes this new unified computing system push announced last week also. Goldman has added the technology giant to its prized CONVICTION BUY LIST with an $18.00 target. Cisco also has $29.5 billion sitting around in cash!
This sector is really starting to heating up. IBM’s $8 billion takeover bid for Sun Microsystems (JAVA) at double the previous market price has ignited an explosion in call option buying by hedge funds betting the industry consolidation trend will continue grow. The large buyers in this sector, IBM (IBM), Microsoft (MSFT) and (CSCO) have cash coming out of their ears, and things certainly are cheap enough. Traders loaded the boat with perennial takeover targets like Network Appliance (NTAP), SanDisk (SNDK), EMC Corp. (EMC), and Citrix Systems (CTXS). Increased takeover activity is a classic sign that the market bottom may be near.
Cisco is still the leader in the internet technology and gadgets space for home and office. When the economy starts to turn around I believe Cisco (CSCO)will be a major benefactor. In the meantime, they have enough cash to acquire just about any company they set their eyes on.
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