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Are Investors Forcing Cisco to Make a Big Acquisition?

Over the years, Cisco Systems Inc. (NASDAQ: CSCO) has been active yet conservative in its mergers and acquisitions (M&A) strategy. As its business continues to mature and secular headwinds grow, one brokerage firm believes that it will need to consider bigger bets to drive growth and accelerate its transition to a software/recurring business model.

Oppenheimer maintained an Outperform rating with a $32 price target, which implies upside of 17.8% from the current price level. This is based on the idea that Cisco should use M&A more to drive incremental growth and accelerate its transition to software/recurring revenue business model.

The firm surveyed 60 institutional investors, and the findings were that they are ready for Cisco to go bigger (but are split on how big) and view Security and Cloud/SaaS as key areas. Although the list of potential targets includes usual suspects — Palo Alto Networks Inc. (NYSE: PANW) and Fortinet Inc...