Gustavo Ballvé on November 4th, 2010
Corporate Strategy, Food for thought, Home, Industries, Investment Themes, Portfolio Management, Tech

One: An article on Slate provocatively called “Will Netflix destroy the Internet?” highlighted a report on “Global Internet Phenomena” (which can be downloaded after a quick, free sign-up). In it, this excerpt highlights part of what makes Cisco so interesting as a “picks and shovels” play in the increased bandwidth usage trend: “Netflix is swallowing America’s bandwidth and it probably won’t be long before it comes for the rest of the world. That’s one of the headlines from Sandvine’s Fall 2010 Global Internet Phenomena Report , an exhaustive look at what people around the world are doing with their Internet lines. According to Sandvine, Netflix accounts for 20 percent of downstream Internet traffic during peak home Internet usage hours in North America. That’s an amazing share — it beats that of YouTube, iTunes, Hulu, and, perhaps most tellingly, the peer-to-peer file-sharing protocol BitTorrent.”

Two: This Financial Times story uses Cisco as an example of tech companies paying dividends and not getting “recognized” for it. In this case, we like the part that says “Behind all of this lies an uncomfortable truth for successful tech companies. Ultimately, the transition from being a growth stock to what the market would consider a value play is a painful one, usually taking years to complete. The decision to pay a dividend is often made early on in this transition. That explains why many tech entrepreneurs instinctively balk at the idea: it is like confessing to their own mortality.”

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