Apple's Cloud Plans Could Be Bad For Cisco

Apple Inc. AAPL's "Project McQueen" has been underway over the past few months, as experts speculate on the expanse and implications of the project. It's supposed that the project is a venture into the cloud space, bolstered by hopes to become more self-reliant on datacenter infrastructures as opposed to public clouds.

While this move would inevitably benefit Apple, it could spell trouble for companies such as Cisco Systems, Inc. CSCO, JPMorgan's Rod Hall surmised in a recent note. Citing RE/Code and VentureBeat, Hall said, "Apple has reckoned that given the fees it is paying Amazon and Microsoft, it could break even with its own data centers within about three years and not have the headache of negotiating with companies it considers rivals in other areas of its business."

Bad News For Cisco?

In addition to the whispers regarding Project McQueen, Hall views Cisco as potentially heading for some bad news. According to the analyst, Apple has recently issued a $3.5 billion USD-denominated bond, cited as "to pay for its capital return program, debt, acquisitions and other expenses."

"We expect Apple to update its repurchase program with its FQ2 results. Given the recent positive move in Cisco's share price following its huge dividend announcement (in spite of weak fundamentals), we wouldn't be surprised if Apple leaned more towards the dividend this year," Hall elaborated.

Hall concluded that the firm's view on Cisco is currently negative, while Apple's foray into developing its own cloud has a lot of potential, and would ultimately solve many outstanding concerns Apple may have regarding competition within the space.