Cisco Woes: Cisco Specific? Economic? Or an Issue for Tech?
Ouch. Cisco is down some 17% premarket after the company’s guidance came in well below expectations and executives offered up a bearish forecast that called into question the strength of technology spending, citing weakening orders from U.S. cable-TV systems and government agencies. There seems to something of a debate amongst analysts over whether the disappointments represent issues with economic fundamentals, specific problems with Cisco or a broader issue for tech. Here’s some of what we’re reading:
Sanjiv Wadhwani, Stifel Nicolaus: While we believe that while the public sector issue is likely to impact Cisco’s peers too, Cisco probably has bigger exposure to that market than some competitors. With a much heralded sales force and forecasting engine, we wonder if taking down expectations two quarters in a row is a sign that perhaps Cisco is overextended with 30 new initiatives.
Joanna Makris, Mizuho: Cisco’s outlook represents a material reset from consensus and our expectations — as well as a material divergence relative to commentary from other networking players. While U.S. Federal and cable represented an obvious challenge this quarter, we are concerned that market share erosion may also be playing a role.
Tal Liani, BofA Merrill: Three key areas of weakness: weak public spending (also evident from Promethean and SMART’s results), 40% decline US cable orders, and weakness in certain countries in Europe. We expect the stock to be volatile near term, but believe the issues are not Cisco-specific, and rather macro related. Such situations have proven to be potential buying opportunities in the past and we reiterate our Buy rating....MORE