Cisco (CSCO) is looking to tap into the growing internet penetration and digitization trend in India, which raises demand for data center infrastructure.
When you’re trading stocks online or conventionally, it is important to figure out what the future holds. We can’t predict the future in detail, but we can identify trends that may potentially result in certain stocks getting more valuable. Tech stocks are always on the move and their value depends on the areas they choose to invest in.
Cisco Looks to India
Cisco’s (CSCO) plan for growth now involves India. Currently the nation contributes a little over 2% to the company’s total revenue, but there is a significant opportunity for growth out there. That’s what Cisco is counting on. The large country has significant networking and Internet requirements as it continues its quest to become a superpower, and Cisco has already surpassed $1 billion in revenue from India in the 2016 fiscal despite that contributing to around 2% of the total revenue of the company. Cisco now has plans to triple its India business in the coming three years.
There are indications that it could well reach its target since its current growth rate in the country is significant. It experienced a major 41% revenue rise and 340% profit jump in 2016 fiscal in India. The country’s aggressive push towards digitization helped the company’s cause. Internet penetration in India has been significant, and CSCO plans to invest $1.8 billion per year in research and development to exploit this penetration.
Internet Penetration Presents Opportunities in India
According to the 2016 Internet Trends report, internet penetration in India in 2015 grew at a rate of four times the worldwide average. The number of internet users in the country in 2020 could increase to 730 million from just 350 million a few years back. This growth will largely be fueled by LTE adoption that ensures really high speed internet. This will cause businesses to make investments in networking and telecom equipment, raising the demand for the kind of routers and modems Cisco manufactures. That’s the opportunity the company plans to tap into.
Deloitte figures state that by 2020, 4G LTE towers are expected to grow to 328,000 and take up 47% of the total market. The smartphone penetration rate is only 58%, which is why the internet adoption rate can continue to remain strong after 2020.
The Need for More Data Centers
Cisco feels smartphones, other smart devices, and the Internet of Things could bring about a sevenfold raise in the country’s mobile data traffic till 2021. So there would be more data centers needed for handling this boom. India could turn out to be the second largest market for data centers in Asia Pacific, since data center investments are expected to touch $7 billion by 2020, a significant rise from $2.2 billion in 2016.
This is the opportunity Cisco is looking to grab with both hands. It intends to set up new manufacturing options and introduce key products. This move to focus on India could boost investor confidence and raise the company’s stock value. It’s a trend you need to keep observing.