It was revealed on Thursday that Cisco Systems (NASDAQ:
) reported a 20% boost in 3Q earnings, despite the fact that the
world's largest manufacturer of computer networking equipment
fears a slowdown in technology spending.
It should be a happy time for Cisco, as it earned $2.2 billion
between February and April, compared with $1.8 billion last
However, shares still fell 9% in premarket trading on Thursday
after CEO John Chambers said that continuing economic uncertainty
was affecting client spending.
Talk about snatching defeat from the jaws of victory.
It seems strange that revenue for that period was up 7% from a
year ago to $11.6 billion, yet brokerages including BMO, Deutsche
and Piper Jaffray were cutting the price target on CSCO stock.
However, with economic trends deteriorating at an increasingly
alarming rate, CSCO is concerned that it could be in for further
estimate cuts as it relies heavily on government and corporate
As a result of all of this, CSCO is forecasting
less-than-impressive fourth quarter revenues between May and July
of a 2%-5% increase, well below analyst expectations. Chambers is
putting a brave face on things, saying that Cisco "will muddle
through this with a little bit of bumps in the road."
That sounds really nice, but it does seem as if the well-being
of Cisco is, for now, out of his hands. Chambers can only hope
that consumer spending experiences an upturn soon as, until then,
it is kind of floundering around. The company's telepresence
sales have been seriously damaged by government spending cuts as
well as cuts be businesses.
To be fair, Cisco is doing what it can to cut costs and, in
the past year, has shaved $1 billion off the running costs.
Still, analysts have mixed opinions of Cisco right now. Nine
analysts still rate it a "strong buy", 15 rate if a "buy", 19
rate it "hold" and two rate it "sell". That quite a broad range,
which indicates that nobody really knows what is going to happen
in the near future regarding sales for the company.
Shares of Cisco closed at $18.78 on Wednesday, and they were
down $1.65 to $17.13 in Thursday morning premarket trading.
The next few months at Cisco will make for fascinating
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