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Cisco vs. Rivals—Where to Invest: Analyst

Monday, 7 Mar 2011 | 10:43 AM ET

Cisco shares have declined 10 percent for the year while a handful of the tech bellwether’s smaller rivals have been trading higher. Mark Sue, director of telecom equity research analyst at RBC Capital Markets explained how the Dow component should refocus its strategy.

“The company went through a period of complacency and we saw some innovations slow,” Sue told CNBC.

Cisco vs. 'Little Guys'
JDS Uniphase, Ciena and Juniper are all up dramatically year to date, especially compared to Cisco stock. What are these "little guy" stocks doing that Cisco is not? Mark Sue, RBC Capital Markets explains.

“The products were good and the brand was powerful, but a lot of the competitors were able to exploit [Cisco’s ] weak spots,” he added. “So that’s why we have these smaller and mid-sized companies outperforming and are nibbling away at Cisco’s underbelly.”

Still, Sue has an “outperform” rating on Cisco’s stock. He also has an “outperform” rating on Ciena , Juniper Networks , Aruba Networks , F5Networks and Polycom . Meanwhile, he has a “hold” rating on JDS Uniphase .

“For big companies, they have to address new markets and Cisco decided to go to the biggest market of them all which caused a level of competition with their partners,” said Sue. “They have to find markets where they don’t have conflict and they’re not competing with some of their big partners such as IBM .”

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Scorecard—What He Said:

  • Sue's Previous Appearance on CNBC (Sept. 10, 2010)

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More Market Intelligence:

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CNBC Data Pages:

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CNBC Slideshows:

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Disclosures:

Sue does not own shares of CSCO, JDSU, JNPR, CIEN, PLCM, FFIV or ARUN.

RBC makes a market in the securities of these companies and may act as principal with regard to sales or purchases of CSCO, JDSU, JNPR, CIEN, PLCM, FFIV and ARUN’s securities.

RBC makes a market in the securities of JDSU and may act as principal with regard to sales or purchase of this security.

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Disclaimer

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IBM
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PLCM
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