We're bearish on Cisco Systems, Inc. (NASDAQ:CSCO) under the current macroeconomic environment. We're excited to see Cisco's earning report for its first quarter of FY2023 (expected on 16 November), but believe weaker demand under current financial stresses will gate-keep Cisco's financial performance.

Cisco is an IP-based networking company that provides an array of differentiated services for providers, enterprises, businesses, and commercial users. More recently, the company's expanding its presence in the network security domain, and we expect this focus on security and data centers to serve as growth catalysts in the long run. In the near term, however, we believe the company will face weak demand as businesses and enterprises figure out how they will spend their 2023 budget. We expect enterprise customers that make up most of Cisco's revenue will be more hesitant to spend their budget on network security under current macroeconomic volatility. We also believe Cisco itself will be directly pressured by the macroeconomic headwinds resulting from foreign exchange headwinds. We recommend investors wait for a better entry point on Cisco stock.

Enterprise spending decisions to gate-keep growth

Cisco is among the largest players in the networking space, but we believe the company is not immune to macroeconomic headwinds impacting customer demand. The current macroeconomic environment is harsh, to say the least, with inflation at the highest it's been in 40 years. Enterprises and businesses are facing increased financial stress, and we expect this to be reflected in their spending habits regarding network security and data centers. Enterprise customers reported a 15% Y/Y growth in fiscal Q4 2022, making it Cisco's fastest-growing customer base. We expect corporate tech buyers to cut costs under inflationary pressures and rising interest rates. While we love Cisco's business model, we believe the company is vulnerable to spending cuts from its customers under current financial stresses.

Cisco also derives a significant amount of its revenue from federal, state, and local government markets. We believe this makes the company exposed to stringent budget behavior by the U.S government. We expect Cisco to grow meaningfully once macroeconomic headwinds ease, but believe the stock price remains volatile in the near term.

The following table outlines Cisco's customer market in its fiscal Q4 2022.

Foreign exchange headwinds are also taking a toll

A significant amount of Cisco's revenue is derived from outside the U.S, around 42% in FY2021, subjecting the company to foreign exchange headwinds due to the strong U.S. dollar. We expect the company's financial performance to be exposed to exchange rates of other currencies - euro, pound, renminbi, and yen - compared to the strong U.S. dollar. We maintain our belief that Cisco will grow in the long run but expect the stock to be pressured by FX headwinds toward 2023.

Long-term growth catalysts in the network security domain

Cisco provides various products and services to service providers, enterprises, and businesses, but security and data centers take the cake for Cisco's fastest-expanding markets. We're constructive on Cisco's rapid expansion in the network security domain. The network security domain is expected to grow significantly with a CAGR of 16.7% between 2022-2030.

The following image outlines the forecasted growth in the global network security market.

Since 2019, Cisco has been focusing its revenue growth on its secure, agile networks segment, and we expect the company to benefit from tailwinds for network security domains worldwide. The company's network security includes products and services preventing unauthorized access to systems. The company's data center products encapsulate Cisco Unified Computing Systems and Server Access Virtualization.

The following graph outlines Cisco's revenue by segment over the past few years.

Not immune to competition

Cisco's facing stiff competition from Arista Networks, Inc. (ANET), Juniper Networks, Inc. (JNPR), Hewlett Packard Enterprise Company (HPE), Huawei, and the Ethernet switch router market. We expect competition will force Cisco's hand to offer discounts and deals to maintain its customer base. Competitors are revamping their product lines in the switch router market, and we believe Cisco needs to bring its A-game to keep up with the competition and maintain profitability.

Stock performance

Cisco grew around 27% over the past five years. YTD, the stock is down about 30% alongside the larger tech peer group. The stock underperforms the S&P (SPY) index on the YTD metric, with SPY declining 17% over the same period. Cisco's competition is also feeling the pressure of macroeconomic headwinds; Juniper is down around 15%, Arista Networks around 11%, Dell (DELL) around 25%, VMware (VMW) about 1%, Aruba (HPE) around 5%, NetGear (NTGR) around 34%, and Extreme Networks (EXTR) up almost 19%. YTD, Cisco underperforms the bulk of its competition. We expect the stock to drop further towards 2023 and recommend investors wait for a better entry point.

The following graphs outline Cisco's YTD performance compared to the index and competition.

Valuation

Cisco is relatively cheap, but we believe there is more downside to be factored into the stock. On a P/E basis, Cisco is trading at 11.6x C2024 EPS of $3.87 compared to the peer group average of 18.2x. The stock is trading at 3.0x C2024 on an EV/Sales metric versus the peer group average trading at 3.8x. We're bullish on Cisco in the long run but recommend investors wait to see how enterprise spending pans out toward the end of the year.

The following graph outlines Cisco's valuation relative to the peer group.

Word on Wall Street

Wall Street is divided on the stock. Of the 38 analysts covering the stock, 12 are buy-rated, 16 are hold-rated, and the remaining are sell-rated. We attribute the lack of a unified rating on Cisco to concerns over how near-term macroeconomic headwinds will impact the stock. Cisco is currently trading at $45. The median and mean price targets are set at $53 and $55, respectively, with a potential upside of 17-22%.

The following tables outline sell-side ratings and price targets for Cisco.

What to do with the stock

We like Cisco's position in the networking space, specifically with its growing focus on security and data center markets. We expect the security and data center markets to enjoy significant growth as the enterprise world becomes more digitized. Yet, we believe the near-term financial stresses will chokehold meaningful growth in the industry towards 2023. We expect more downside to be factored into Cisco stock in the near term and recommend investors wait for a better entry point.

Copyright © 2022 IDG Communications, Inc.

Protein is great. Our bodies are largely made of protein, and if you lift weights, I bet you already know that eating enough protein is important for building muscle. But what if you just want to be healthy in general? What if you don’t even care that much about being healthy, but want to avoid overeating? Protein is important for you too.

A new study has put the spotlight on a lack of protein as a potential driver of overeating. Its findings give more support to an existing concept called the “protein leverage hypothesis.” This is the idea that we will eat until we get enough protein, and so if our diet is made of low-protein foods, we may end up eating a lot of food, and thus a lot of calories, just to get our fill of protein. Sometimes people call this “protein hunger.”

Why protein is important

Our bodies don’t just need protein to build new muscle tissue. We also need protein to heal and repair damage. Our bodies continually break tissues down and rebuild them, and we need protein for that task as well. Protein is also the building material for enzymes, which do everything from digesting food to detoxifying chemicals in our livers to helping our blood clot. Many hormones are made of protein; the receptors that receive hormonal messages are made of protein as well.

So we need a steady influx of protein just to keep our body functioning. And if we exercise—which is important for a healthy body—we need protein to support that as well. Without enough protein, we can actually lose muscle mass over time. Loss of muscle is one of the perils of aging, but we can reverse it with strength training and, yes, sufficient protein.

And if the protein leverage hypothesis is correct, we also need protein to keep us from overeating.

Put all that together, and it’s worth making sure to get enough protein in your diet. At an absolute minimum, we need 0.36 grams of protein per pound of body weight per day (so, 72 grams for a 200-pound person). We’ve run the numbers for various body sizes and activity levels here.

“Healthy” foods are often low in protein

If you’ve heard the average American eats “too much” protein, stay with me a minute. It’s true that, on average, we eat more than the minimum requirement of 0.36 grams per pound. But the minimum requirement is low; it’s meant to be the amount that will keep you from being protein-deficient. Athletes will eat more, up to a full 1 gram per pound of body weight. Most of us should be somewhere between those numbers, especially if we’re active. And protein isn’t something where “too much” is harmful, so it’s good to err on the side of getting more than the recommendation rather than less.

So what happens when we decide we want to eat healthy? Chances are, if you’re on a diet, some of the things you’ll cut out are good sources of protein: burgers, cheese, fatty red meat, processed meats like hot dogs and deli meat.

Maybe you’ll swap the burgers for chicken breast, which should be fine from a protein standpoint—but then you’re also eating smaller portions. A Big Mac has 26 grams of protein in those two little patties; this chicken-based American Heart Association certified Lean Cuisine meal only has 14 grams. If you’re going for plant-based meals instead, those tend to be even lower in protein. A salad with dressing usually has no protein unless you’re adding something like chicken, cheese, or nuts—and there usually isn’t much protein in a sprinkling of cheese or nuts.

The amount of protein you need when you’re eating in a calorie deficit is actually the same, or arguably more, than when you’re not trying to lose weight. It’s fine if you don’t want to eat a Big Mac, but a proper low-calorie replacement for that meal would be something that still gives you 26 grams of protein, but with fewer calories from fats and carbs.

Which foods are high in protein?

To help you navigate this issue, let’s talk about which foods are high in protein, and which look like they should be, but aren’t.

Foods that are high in protein without being high in calories include:

• Chicken breasts and thighs
• Ground beef, especially leaner mixes like 90/10
• Greek yogurt or Skyr
• Whey powder and other protein powders
• Fish (depending on how fatty it is)
• Tofu and tempeh
• Beans and lentils, although they come with a sizable helping of carbs—depending on the type of bean and the way it’s prepared, these could easily be on either of our two lists.

Foods that may not be as high in protein as you think they are:

• Eggs have 6 grams of protein each; it adds up, sure, but an egg is not a protein bomb.
• Foods that have the word “protein” on their label are usually still pretty low in protein. A protein muffin may have more protein than a regular muffin, but neither is actually that high in protein.
• Quinoa has more complete proteins than other foods in its category, but it’s not high in protein by itself. Quinoa has more protein than rice but about the same amount as pasta or wheat bread.
• Peanut butter has more protein than, say, real butter. But the thin smear you spread on toast will only add a few grams to your daily total.

These are all still good foods to eat, but don’t mistake a two-egg omelet for a meal that gets you ahead of your protein requirement for the day. The 12 grams of protein in that omelet are far less than the 27 grams in a smallish chicken breast.

Especially if you’re trying to eat healthy, it’s worth looking up the nutrition information for a typical day’s meals and seeing how your protein intake adds up. And if you need ideas, we have a collection of cheap, easy, high-protein meals here.

Cisco announced new capabilities across its security portfolio so teams can be more productive and protected wherever they are working from.

Unveiled at Cisco's exact annual Partner Summit conference, the news demonstrates continued progress towards the strategic vision of the Cisco Security Cloud that will protect the integrity of an organization's entire IT ecosystem.

The end-to-end platform will safeguard users, devices and applications across public clouds and private data centers, without public cloud lock-in. 

"Security is no longer optional. It is critical to every major initiative an organization may have," said Jeetu Patel, Executive Vice President and General Manager of Security and Collaboration at Cisco. "We are committed to delivering more value for our partners by continuing to drive innovation and making it easier to do business with Cisco. Partners can land key products and then expand across the Cisco Secure portfolio to increase profitability while enabling customers to securely achieve their digital transformation goals."

Zero Trust

Duo Passwordless Authentication is now available for all customers to protect Single Sign On (SSO) applications. Users can login without any password by leveraging biometrics (Windows Hello and Mac touch ID) and security keys. Cisco is also adding the Duo Mobile app as a new option for passwordless authentication. This will simplify implementation and lower the total cost of ownership for customers, as well as better meet the needs of all end-users as global biometric adoption stalled after several years of sharp growth. Among Duo customers, biometrics were enabled on 81 percent of mobile devices.

The findings are from Cisco's 2022 Duo Trusted Access Report, also released today. The annual study is based on roughly 1.1 billion monthly global authentications, an increase of 38 percent year-over-year, across more than 49 million devices and 490 thousand unique applications.

"Passwordless authentication reduces the risk of phishing attacks and their ability to utilize stolen passwords or as we've seen more recently, MFA fatigue," said Dave Lewis, Global Advisory CISO at Cisco. "As cyberattacks continue to move closer to end-users, there is a huge opportunity to embrace low-friction authentication methods that ensure only trusted users and devices gain access to applications and corporate resources."

Network Security

Employees are going back in the office. Among Duo customers, remote access authentications declined since peaking in 2020, reaching lower than pre-pandemic levels in 2022. As hybrid work becomes the new normal, organizations are demanding high-performance network security without the increased cost.

To better meet the needs of customers, Cisco is introducing the existing addition to the Secure Firewall 3100 Series, the first firewalls purpose-built for hybrid work. Secure Firewall 3105 expands sizing options for branch offices at a price point accessible to more organizations. It empowers hybrid workers with support for more remote users and increases VPN speed and performance by 17X.

Initially launching in the US, Cisco Capital is now offering Cisco Lifecycle Pay for Secure Firewall, a Cisco Capital fixed term subscription payment solution, to provide a financial incentive and lower total cost of usage without the burden of ownership.

Customers can receive a 10 percent replacement incentive when returning existing firewall hardware and upgrading to Cisco's latest qualifying firewall technology. Cisco Capital offers a global suite of segment-and architecture-agnostic payment solutions that enable partners to better support their customers and match their buying preferences.

Secure Connectivity

As critical resources are moved into cloud, customers are concerned about data vulnerability. The challenge is only growing, as authentications to cloud applications increased 24 percent in 2022. Data needs to be protected, not just because of the risk tied to malicious threat actors, but the unintentional issues caused by inexperienced users.

To help with this, Cisco is enhancing Umbrella with stronger data loss prevention (DLP) capabilities, including unified policies and reporting across API-based out-of-band DLP, and real-time inline DLP, making management easier for security teams.

Umbrella is a foundational component of Cisco+ Secure Connect, Cisco's unified Secure Access Service Edge (SASE) solution. Highlighting their abilities with the integrated networking and security architecture, partners can now achieve SASE specialization to help customers securely enable cloud development and deployment, remote work, and edge computing.

This content was produced in partnership with Cisco.

With so many working from home these days, it’s important to have an infrastructure in place that allows for the seamless transition between remote and office locations. One way to solve this is to pull all of the data and applications that are resident on a person’s laptop and have the data instead be resident on a system architecture within the customer’s data center. That enables the centralized management of applications, data, and system backups. Patches and updates to the apps can then be prioritized. So, VDI provides the ability for a laptop or home computer to be able to access the required data and applications within a consistent user interface. An additional benefit is that if the company laptop is stolen, a new one can be sent to the employee and they can access their virtual desktop and be productive immediately. A smart way to approach the datacenter infrastructure for VDI is to leverage cloud computing — more specifically Cisco’s future-ready UCS X-Series Modular Systems, for converged and hyper-converged infrastructure.

Cisco’s Virtual Desktop Infrastructure (VDI) solutions for X-Series provides a remarkably flexible, scalable, and capable provisioning and management tool for an organization or business that needs it. But here’s the most important point: It’s not just for work-from-home situations. The technology offers a widespread and scalable rollout for just about any form of implementation for any industry. IT organizations benefit from all of the technology X-Series has to offer, including high server performance, 100G networking, Nvidia GPU support on both the server compute node and via a dedicated node, comprehensive management tools, within fully scalable chassis. And since it’s future-ready and modular, upgrades and streamlined performance are always accessible — you don’t have to worry about upgrading all of your hardware to keep up with performance and software improvements.

Let’s take a closer look at what Cisco’s VDI infrastructure truly has to offer, and how NVIDIA’s latest and greatest solutions plays a role.

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Keeping it simple, virtually and otherwise

There is a wide range of job roles across a number of vertical markets that VDI can address. One type of user is called the “Power User,” and it’s a job role where they work with applications that generate very complex renderings. The work requires greater amounts of memory and Intel CPU processing cycles to complete, which impacts the overall system performance — thus they are a high-power user. One way to ease power burdens is to add NVIDIA GPUs to the configuration. A Graphical Processor Unit (GPU) can perform the application renderings, removing the burden from the CPU inside the server. Of course, this offers many benefits to performance and the user experience.

Cisco’s technology delivers a future-ready infrastructure prepared for just about anything, with a remarkably simple operating model — organizations benefit from simple configuration, easy deployment and implementation, managed from Cisco Intersight.The result is an ideal platform on which leading VDI “broker” solutions from Citrix and VMWare can be deployed. With Cisco’s solutions, customers can roll out highly-advanced systems and architecture easier than ever.

Some of the advantages include:

• Service performance and availability
• Operational profitability
• Workforce productivity
• Reduced CapEx and OpEx through centralized upgrades
• Cloud managed and updated security
• “Future-Ready” hardware with Cisco UCS X-Series

It’s a great platform for any company that wants centrally managed infrastructure, with less hassle and improved uptimes. But also it’s highly scalable, ideal for IT services, with higher profitability and performance than most local solutions. Organizations can swap over pretty easily, netting significant cost savings via server consolidation, power savings, and potentially application license savings, but without sacrificing the power and performance they’ve come to expect.

How do the employees benefit? They can work from any location, on any endpoint, and at any time without losing access to the tools they need most — and better yet, without anyone having to manage several forms of hardware, various versions of applications, patch management, and all of the IT overhead associated with it.

The key to ‘future-proof’ is flexibility and scalability

Referring to a future-proof solution, the primary focus is the hardware behind the scenes, and in Cisco’s systems, that’s governed by the X-Series architecture. Yes, as time goes on and more powerful hardware is needed, newer compute nodes can easily be added to the X-Series chassis, all managed by Cisco’s cloud-based systems management tool, Cisco Intersight. The Cisco VDI technology, utilizing either Citrix or VMware Horizon, allows for more workloads with higher demands, albeit now using more-efficient hardware. As opposed to traditional rack-mounted servers, with UCS all that power is still delivered through a smaller and more manageable form factor. It’s more convenient overall and uses a single multifunctional management tool for administrators and IT.

Cisco claims the UCS X-Series “rethinks what a server can and should be.” It’s adaptable, expandable, and remarkably efficient — by deploying these systems, businesses save time on IT and digital operations. IT teams have had to completely reimagine their operating models to match the new remote and hybrid workforces. Even with teams returning to the office, the same concerns are going to persist, particularly when it comes to security and dynamic endpoint management. Yet with VDI solutions, it doesn’t matter whether you’re managing 500 users to 5,000, or where they’re connecting and working from — home, office, or a remote location — instant access and flexibility are always there.

Where does NVIDIA fit in?

At the heart of those UCS X-Series systems for accelerated VDI are NVIDIA’s powerful GPUs and software, and not just for graphics-intensive capabilities either. Breakthroughs in AI, data analytics, IT and managed services, accelerated computing, and beyond are all being supported and driven by NVIDIA and Cisco’s technologies. The NVIDIA A16 and A40 are ideal fits to support the vast majority of power user requirements while the NVIDIA A100 Tensor Core GPU, for example, complements AI infrastructure and makes a huge performance difference for Cisco customers.

Server-side, the hardware works together to provide unprecedented performance and experiences to users, who are connecting from all over the world. GPU-accelerated virtual desktop solutions elevate the user experience in many ways. Yes, the performance is enhanced, but the related systems are capable of much more than your average desktop solution. Graphic and visual design, game development, software development, AI processing, 3D rendering of any kind — all of these activities benefit from NVIDIA GPUs. Distributed workers get the power they need for any task, and they don’t have to upgrade a single thing — it’s accessible from any endpoint whether that’s a work laptop, desktop at the office, or another remote platform entirely.

Turbocharge your data solutions

It’s not any one environment that’s going to be the major driver of cloud computing adoption. Just as IT organizations and workers adapted to a sudden shift to hybrid work circumstances a couple of years ago, it’s going to happen again with many returning to offices and IT relocating workloads by moving from the cloud back to on-premise deployments in the data center. It doesn’t make sense to manage the necessary hardware on traditional platforms with old methods, especially when data centers are maintained in-house. A more cost-effective, flexible, and, frankly, a better-performing solution is to offset the technology, by implementing Cisco’s VDI platform(s). It empowers the same paradigms as a BYOD environment, albeit with much safer and better-maintained solutions behind the scenes.

Some real world uses are:

• Managing centrally-accessed virtual desktops that are delivered to end users on their choice of endpoints — they choose where and how to connect.
• High-performance, storage-intensive virtual desktops that require optimal performance, like in graphic design and development.
• Efficiently provisioned and seamless application use, across workstations, with the proper software updates and security patches, remotely deployed.
• Super-flexible computer, storage, and networking scaling with dynamic workload requirements — more power can be accessed near-instantly if needed.
• Access to next-generation hardware without any major in-house upgrades, but also fully accessible from any device, at any location.
• Unlocking instant access to a centrally and fully managed data solution without adapting, installing, or upgrading any on-site hardware.

In a world where infinitely more power and performance are required, and where there’s a continued demand by the average workforce, it makes sense to roll out a centrally managed solution like Cisco’s VDI technology. Why handle everything on your own when you get the full support of industry experts, with the hardware and resources to back it all up?

NVIDIA and Cisco are collaborating to deliver precisely this, in virtual desktop and cloud technologies that truly transform the end user experience. If you have any lingering questions, and as with most things, the best way to understand is to experience it for yourself, or rather experience it with the rest of your team(s).

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