Both Cisco Systems (NASDAQ: CSCO) and Intel Corporation (NASDAQ: INTC) operate in the technology business, however their businesses differ greatly. Intel is the king of semiconductor chips. The company is the best in the world for making powerful processors that run our applications. Cisco on the other hand is the network giant. The company is the standard for offering connectivity through it's routers and switches.
Recently however, Cisco reported a quarter that disappointed investors. The stock immediately crashed to 52-week lows of $19 and change. Cisco's market capitalization now resides at $110 billion. Intel, which has been relatively more stable has remained with a market cap of $117 billion. It is worthwhile to note that Cisco's market cap has been well above Intel's historically even though both companies have stable and growing businesses. What's more interesting is that today Intel trades at a PE ratio of 11.37 while Cisco has a PE of 14.46 even after the major recent sell off. While Cisco is decline, Intel sees new opportunities in the mobile phone industry - an area which it has waited on the sidelines. Cisco has been immersed in the mobile phone revolution, yet the results to not seem to show in its earnings.
With Intel operating on all cylinders and beating estimates quarter after quarter, does the company deserve to trade at a discount to Cisco? Intel is gaining momentum as it continues to impress investors. The discrepancy gap between Intel and Cisco could soon close, making the chip-maker very happy.
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