Cisco in a quest to accelerate revenue growth

Question: I have 200 shares of Cisco Systems Inc. Will these be doing better soon?

Answer: Cisco, the world’s dominant supplier of data networking equipment and software, doesn’t want to become just another mature company gradually losing market share to newer competitors.

Cisco remains dominant in its core market, with 70% of the market for telecom switches and a clear lead in data routers.

But in a quest to accelerate revenue growth, the cash-rich giant has been making acquisitions and launching product lines. The question is whether it is paying too much for the firms it goes after or is rushing products to market before their time.

Cisco recently bought video-conferencing specialist Tandberg of Norway for more than $3 billion and Pure Digital Technologies Inc., maker of the Flip camcorder, for $590 million. It also acquired privately held ExtendMedia, a maker of video-management software, for an undisclosed amount.

Among Cisco’s new products are the Icon phone headset, the business-oriented Cius tablet computer and high-end video-conferencing gear. The company also has launched a security device for railroad stations that is designed to detect safety problems quickly and inform passengers through a public address system.

The San Jose firm also makes network-management software for data communication between computer networks. Its newer markets include home networking, storage technology and Internet-based telephony. Significant competitors include Juniper Networks Inc., Hewlett-Packard Co. and China’s Huawei Technologies Co.

Cisco shares are down 2.4% this year after soaring 47% last year.

In the fiscal fourth quarter, which ended July 31, the company’s profit climbed 79% from a year earlier. Analysts on average project earnings will rise 7.5% in the current fiscal year and 14.5% the next year. The average forecast for the firm’s five-year annualized growth rate is 13%, compared with an expected 16% for the overall communication-devices industry.

Cisco last month said it would start paying a dividend this fiscal year, with the annual payout rate expected to be 1% to 2% of the company’s share price.

Wall Street analysts give Cisco’s stock overwhelmingly favorable ratings, consisting of 18 “strong buys,” 17 “buys,” nine “holds” and three “underperforms,” according to Thomson Reuters.

Question: How do you buy U.S. Treasuries? My wife and I have been discussing this because we’re not sure what to do with our money these days.

Answer: You can buy U.S. Treasury bills, notes and bonds on the secondary market through your bank or brokerage firm, which will buy them on your behalf and then put them in your account.

Despite low yields, Treasuries are luring investors worried about the risks of other choices.

You also can buy newly issued Treasuries directly from the government without paying a commission if you open a Treasury Direct account with the U.S. Treasury. The minimum purchase is $100. The site treasurydirect.gov explains how to create an account.

You also can invest in a mutual fund dedicated to owning Treasuries.

Andrew Leckey answers questions only through the column. E-mail him at yourmoney@tribune.com.