February 4th, 2009

red down arrow

Cisco Drops 4% in after hours trading

Bonzer believes that as goes Cisco, goes the world economy.  In other words, Cisco will lead the recovery. (Full disclosure, the Wolf owns CSCO shares) The bad news, CSCO fell 4% in after hours trading after reporting today. The good news, CSCO will be an even bigger BUY below $15.00, if you believe this recession will EVER end. 

The global economic downturn will continue to hammer computer networking giant Cisco Systems Inc., chief executive John Chambers said Wednesday. 

In its current quarter, Cisco expects to see revenue decline between 15% and 20%, he said in a conference call with analysts.Analysts expect to see revenue fall by 11% in the third quarter, according to a poll by Thomson Reuters.

Cisco reported a profit and revenue that beat Wall Street forecasts, but the company said it expects year-over-year sales to fall in the current quarter. Cisco said that incoming orders declined dramatically in January, indicating that the shrinking economy has more pain in store for the industry. 

Chief executive John Chambers said the company, the world's largest maker of computer networking gear, saw progressively fewer orders as its latest quarter progressed. In November, orders were down 9 percent from the year before. In January, the drop was 20 percent.  Chambers projected a 15 percent to 20 percent drop in revenue in the current quarter. That would put revenue at $7.8 billion to $8.3 billion, below the average estimate of $8.7 billion projected by analysts.

The world's largest maker of computer networking gear said it would accelerate its move to cut costs in the face of the economic downturn. Since its fiscal second quarter ended Jan. 24, nearly a month after other technology companies, its report will be scrutinized for market trends in the new year.  

Cisco's fiscal second quarter ended Jan. 24, nearly a month after other technology companies that have reported their quarterly results recently. That means Cisco's results provide a window into future reports from the rest of the industry. Cisco is also sensitive to trends in the market because more than 80 percent of its revenue is from sales, rather than recurring service contracts.