The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First. 

Cisco Stock Price Prediction: Summary

• Cisco might be worth a buy now.
• The new partnership with Ericsson will help Cisco improve its sales.
• Ericsson has a highly-favored status in China.
• Cisco needs a conduit to help it regain even a little of its former glory in China.

I had a very bearish long-term outlook for Cisco (CSCO) back in December of 2013. This was due to Cisco products being permanently banned by the Chinese government. However, I am now quite hopeful about Cisco’s future. The new partnership with Ericsson (ERIC) could help Cisco replace the lost sales to China. Ericsson and Cisco will now sell each other’s cloud computing services, Internet of Things solutions, and networking hardware products.

I expect CSCO’s stock price to once again hit $30 within 12-months once the partnership with Ericsson starts bearing fruit. Cisco’s stock price has been on a roller-coaster ride this year. I do not think Cisco’s promise of $10 billion investment in China will help it regain its former sales success in China. Due to Cisco routers being installed with backdoor spying tools, Chinese government and private firms are unlikely to trust these products again.

(Source: Google Finance)

Why This Partnership Matters

Cisco has little chance of improving its dying business in China. What it needs to do now is to find new markets to replace the lost sales in China. The partnership with Ericsson is one way to do this. Ericsson is a global leader in 4G LTE and mobile wireless infrastructure deployment. Cisco’s unsold core network routers and switching products for China could instead find buyers among the international clients of Ericsson.

The Chinese government ban on Cisco-branded ethernet switches and routers definitely helped Huawei gain market share at the expense of Cisco. Please study the Statista chart below. Before the Snowden/NSA Scandal, Cisco had over 64% market share in routers/switches.

(Source: Statista)

State-owned Chinese firm Huawei actually more than doubled its share after Cisco network routers/switching products. Ericsson’s wide network of clients outside China are now potential clients for Cisco products. The carriers who hire Ericsson to deploy 4G LTE will still need some routers and switches. Cisco now also tout a robust suite of cloud services that could again find customers amongst Ericsson’s clients list.

Why Ericsson Teamed-up With Cisco

Ericsson also needed Cisco to address the all-in-one threat of the combined might of Alcatel Lucent (ALU) and Nokia (NOK). With Cisco’s wide array of products, Ericsson could now also provide its clients with a unified solution for whatever carriers, data centers, and enterprise clients need.

Cisco offers analytics/automation, cloud computing, enterprise collaboration, and data center management. These are services that Ericsson clients could also benefit from. I even opine that some Chinese customers of Ericsson would not mind signing up for a Cisco enterprise collaboration software service. As far as I know, Chinese officials ban is only over hardware products of Cisco.

My Takeaway

Cisco’s future leadership in networking routers and switching is now substantially improved by the collaboration with Ericsson. Like the Nokia Alcatel tandem, Ericsson’s strength in wireless infrastructure is a perfect fit for Cisco’s industry leadership in networking routers and switches. Unlike Huawei and ZTE, Cisco also lacks mobile infrastructure deployment products. Ericsson’s wireless solutions/products could also therefore be combined with Cisco’s hardware products under an all-in-one offer.

Yes, the threat from Huawei and ZTE are still ever present. While those two rivals of Cisco cannot hope to sell routers/switches to American firms, they could sell cheaper networking routers and switches in countries that Cisco also operates. I therefore expect Cisco to acquire more companies to help it reduce its exposure to networking hardware sales.

The $700 million acquisition of collaborative software maker Acano again fortifies Cisco’s move to grow itself as a software/subscription-based business operator. Acano rents out online video/audio collaboration tool. Its product is similar to Microsoft’s (MSFT) Skype for Business.

Cisco’s enthusiasm to expand further its business model is why investors should really add this stock to their long-term portfolio. I opine that Cisco has the cash flow to compete with Microsoft and Amazon when it comes to cloud computing and cloud services. Ericsson’s assistance is also a big positive factor toward calculating Cisco’s future as a premium enterprise software/service provider.

My Buy recommendation for Cisco is supported by I Know First’s bullish long-term algorithmic forecasts for CSCO. The bright green 1-year 36.83 score for CSCO is saying that market trends are hinting this stock could go higher in price. The 0.47 score also means I Know First’s self-learning algorithmic machine had excellent success rate in predicting CSCO’s stock movement.

The bullish forecast of I Know First is consequently in line with the positive outlook of hedge fund managers over Cisco. A check on my premium account at TipRanks, reveals many hedge fund managers have steadily increased their positions on Cisco the past three quarters of 2015.

It is always safer for small retail investors to follow the investment actions of big money investors. CSCO is a Buy.