Why Cisco Systems Inc. (Nasdaq: CSCO) Stock Won't Be Hurt by Regime Change

CSCO stockSince John Chambers stepped in as CEO in January 1995, Cisco Systems Inc. (Nasdaq: CSCO) stock is up more than 1,500%.

But after two decades at the helm, Chambers will be stepping down. In July, 17-year Cisco vet Chuck Robbins will take over the reins of the networking hardware titan.

And with Robbins already naming his executive team ahead of next month's transition, investors wonder what this regime change will mean for CSCO stock.

Cisco is the undisputed leader in its market.

It leads market share in switches at 56.8%, routing at 47.8%, data center network hardware at 46.9%, and even to a lesser extent, IP telephony and Wireless LAN at 28.3% and 24.7%, respectively, according to Bloomberg Intelligence.

So right now the biggest question for shareholders is how Cisco's change at the top will affect the CSCO stock price...

Cisco (CSCO) Stock Won't Take a Hit with New CEO

The best-case scenario for CSCO stock with Robbins stepping in as CEO is that investors will be excited by a long-awaited change in management and give it a little jump.

"I'm encouraged to see they're changing leaders," Money Morning Defense and Tech Specialist Michael A. Robinson said. "I think that Chambers has been there a little bit too long."

At worst, CSCO stock will be unmoved by what is a rather underwhelming transition.

But that will hardly be enough to diminish the value a name like CSCO stock can bring to your portfolio.

It's important to note that Robbins is a business-as-usual company man. He won't depart from Chambers in any radical way.

Robbins is not going to do to Cisco what Satya Nadella did to Microsoft Corp. (Nasdaq: MSFT) when he took over for former CEO Steve Ballmer last year.

But then again, Microsoft needed a big change. Cisco doesn't.

That means Robbins will have this one main goal to focus on...

"The challenge for the new CEO will be defending market share," Robinson said.

cisco stockWith Cisco firmly out in front, there are worst jobs Robbins could have been tasked with. Cisco is currently in no danger of ceding its unwavering market dominance, even as Cisco's competitors - which principally include Juniper Networks Inc. (NYSE: JNPR) and its Chinese counterpart Huawei Technology Co. Ltd. - have chipped into that market share.

That's not to say heading Cisco will be the easiest CEO job...

Right now, the biggest challenge for the network hardware industry is not much different from what's shaking up the enterprise tech industry as a whole. That is, the move from traditional data center architecture to so-called "virtual machines" and a push to separate data from hardware.

Now, Cisco doesn't have the unenviable task that other tech stocks like Microsoft and International Business Machines Corp. (NYSE: IBM) have of competing in the cloud space, but networking is experiencing a similar shift to software-defined networks (SDN).

[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]

Networking hardware hasn't changed too much over the last two decades. The quality and speed and efficiency have changed, but there have been very limited efforts to decouple the management of networks from its hardware.

SDN consolidates control of networking outside of the individual hardware. That's the next big trend on Cisco's radar, and it's a shift that Robbins will have to oversee if Cisco wants to remain in control.

The SDN market is expected to grow from $3.4 billion in 2014 to $35.6 billion in 2018, according to SDxCentral.

Cisco held about a 44% market share in all data network hardware, which was an $18.4 billion industry in 2014, according to Bloomberg Intelligence.

And while Cisco is going to have to change with the trends, there's little to suggest the industry is going to change so dramatically that CSCO stock loses its value in a balanced portfolio as a solid tech investing play.

"They still make good products," Money Morning's Robinson said. "It's one of those big-cap companies that I think is a good foundational play."

Bottom Line: CSCO stock will face some challenge in the long term in the move to SDN, but it is the market leader and will likely be guiding the industry into this new era as opposed to lagging behind. Its firm control in networking makes the change at the top from Chambers to Robbins almost boring, given that Cisco isn't looking for a sweeping change, nor is Robbins the face of some revolution. But that's all a good thing. And while Cisco may not be the most exciting of tech stocks to buy, CSCO stock is a reliable large-cap technology play to build a portfolio around.

Jim Bach is an Associate Editor at Money Morning. You can follow him on Twitter @JimBach22.

Your "Get Rich" Tip of the Day: Brush up on your tech lingo... These four buzzwords are going to make investors a lot of money in the years to come...