Update Cisco Systems (CSCO)
The recession is certainly over for Cisco Systems (CSCO). Today, February 3, after the market close the company reported earnings for the quarter that ended in January (Cisco’s second quarter of fiscal 2010) of 40 cents a share. That was 5 cents a share better than Wall Street projections.
Tech stocks had already finished strong for the day before Cisco reported. The positive surprise could be enough to keep what was one of the weakest sectors in January on the mend. (For more on the January slide in the technology sector and what it means for the market as a whole see my post http://jubakpicks.com/2010/01/28/odds-that-this-is-a-10-correction-and-not-just-5-rise-as-tech-stocks-sink/ )
Chances are pretty good since unlike a lot of tech companies that have followed great earnings reports with disappointing guidance, Cisco raised projections for the next quarter in its conference call.
Technology shares leading this rally so far
Technology stocks look placed to lead the market on both technicals and earnings.
After Friday’s sell off, the sector resumed an uptrend on Tuesday January 19 that stretches back to the late November lows. Strong results from Intel (INTC) on Thursday and IBM (IBM) argue that earnings will support the strong technical upward trend. Both companies announced fourth quarter earnings that beat Wall Street estimates.
There’s one part of the technology sector that’s looking especially strong.
Update Cisco Systems (CSCO)
Cisco Systems (CSCO) reported earnings of 36 cents a share for its fiscal first quarter of 2010 after the stock market close on November 4.
Both earnings—by 5 cents a share—and revenue—by $126 million—beat the consensus Wall Street estimates. However, revenue fell by 12.6% from the fiscal first quarter of 2009.
But the big news wasn’t the numbers from the just ended quarter but CEO John Chambers’ confirmation of his optimistic projections when the company reported fiscal fourth quarter earnings in July. Then Chambers had said Cisco saw the fourth quarter as a tipping point that marked a transition from falling sales to future growth.
This quarter he not only said that results confirmed that projection but backed it up by announcing very concrete actions.
Cisco Systems makes another acquisition
Today’s buyStarent Networks (STAR). Price $2.9 billion in cash.
What does Starent do? It makes gear that lets wireless carriers deliver multimedia broadband to 3G and 4G smartphones. In this case multimedia means video.
That’s the big prize since Cisco Systems (CSCO) estimates that by 2013 about 64% of the Internet’s traffic will be video. After the acquisition Cisco will have a complete product line up for wireless operators, according to Wall Street analysts.
Verizon, the biggest U.S. wireless operator, is Starent’s biggest customer.
Update Cisco Systems (CSCO)
On October 1 Cisco Systems (CSCO) announced an offer to buy video conferencing leader Tandberg for $3 billion in cash. This is exactly the kind of new economy deal-making that drove me to add Cisco Systems to Jubak’s Picks on September 25.
The deal, which has been recommended by Tandberg’s board, will extend Cisco’s current video conferencing product line, heavily weighted toward high-end “telepresence” systems that sell for $150,000 to $200,000, into the larger conference room and desktop video conferencing market. The high-end telepresence market is about $500 million annually but the video conferencing market is about $3.5 billion, according to technology market watcher Gartner. The video conferencing market is growing by about 18% a year, Gartner estimates.
The deal will also bring Cisco network-based switching technology that will make it possible for videoconferencing systems made by different companies to work alongside each other. That technology and the buy itself will increase competition in this space between Cisco and Microsoft (MSFT).
