Cisco SystemsCSCO recently announced the pricing of senior unsecured notes aggregating $7 billion. These bonds have been issued in six tranches of different amounts with varying coupon rates and maturity dates. The offering is expected to close on Feb 29, 2016, subject to customary closing conditions.

The notes, carrying an interest at a floating rate equal to three-month LIBOR plus 60 basis points, will mature in 2018. The $1.25 billion, $1 billion, $2.5 billion, $500 million and $750 million senior notes, with annualized interest rate of 1.400%, 1.600%, 2.200%, 2.600% and 2.950%, are due to mature in 2018, 2019, 2021, 2023 and 2026, respectively.

Management intends to use the net proceeds for general corporate purposes. These may include share repurchases, debt repayment, including the repayment of previously issued senior unsecured notes, acquisitions, investments, additions to working capital, capital expenditures, cash dividends or investments in its subsidiaries.

Moody’s Rating

Moody’s Investor Services – the credit rating agency of Moody’s Corporation – assigned an “A1” rating to the Notes. The A1 rating carries a stable outlook.

The rating was based on the Internet protocol (IP) provider’s strength in network equipment domain aided by its broad and innovative product line, huge extent of operations and distribution, end to end networking capabilities and advanced technology development abilities. Despite intensifying competition from several smaller players, these key points helped the company sustain its market share.

In addition, the company’s strong footing in the networking space, cost efficiency and a sturdy balance sheet influenced the rating. The company has around $60.4 billion in cash and highly liquid short-term investments, up $1.3 billion during second-quarter fiscal 2016.

The company maintains strong liquidity, with cash and short-term investments at roughly 53.6% of total assets. This enables the company to return value to shareholders through regular share repurchases and dividend payouts. Moreover, it allows the company to invest aggressively to enlarge its core business and effectively deal with competitive challenges.

Cisco carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Extreme Networks Inc. EXTR, Netgear Inc. NTGR and QLogic Corp. QLGC. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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