The Slide of Cisco Systems – first of many?

An article by Punit    No Comments

Cisco Systems is the largest maker of networking equipment in the world and one of the 30 companies that makes up the Dow Jones index. However, this week the company lost a lot of its optimism with news of a poor sales forecast, which in itself helped to bring down the rest of the technology sector. This is bad news for investors who thought that technology would be the one sector always going up during the recession.

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Anyone would agree that Cisco Systems Inc. is the largest maker of networking equipment on Earth, but even this company is not immune to poor sales forecasts. The stock declined 4.5 percent in NASDAQ trading this past week as its sales forecast did not live up to investors optimism on the recovery of the technology sector.

Cisco Systems Inc. forecast sales of roughly $10.7 billion in the current period, which would follow the record revenue that the company had in the last quarter. Bloomberg had estimated that the sales revenue forecast would be $10.6 billion but other estimates were over $11 billion.

Cisco is not the only company to exceed most projection but come up short in for investors. Both Microsoft and Google have done the same and seen their stocks slide. This does not mean that Cisco is doing poorly. The stock went up 43 percent over the past year and this shows that corporate spending is going up.

For the first five months of this year though, Cisco has seen its stock go up only 6.6 percent, sitting at $25.53 this week after falling by $1.21.

Revenue in the last quarter had gone up 25 to 28 percent from the year earlier.

Cisco is benefitting from corporate customers buying more technology as they deal with the new bandwidth-consuming video on the internet. Many companies are also reworking how they access the internet. So, many investors do not think that this boom for Cisco will last and the company may see its profits fall this next quarter. An example of this is the fact that Cisco is lowering prices to deal with competitors Hewlett-Packard and Juniper Networks, which shows that Cisco is facing mounting competition.

Things may seem good for Cisco right now but many worry that this will not last. With Cisco trying to exceed expectations for its sales forecasts, there is a chance that some investors may end up losing money when the sales projections do not pan out. Since Cisco is one of the leading companies in the technology sector, when the company goes down, so too does the technology sector. One of the reasons that the Dow Jones fell this week was because of Cisco Systems saw a slide in its value. In addition, bank stocks also fell as a result of criminal investigations of the eight largest banks in the United States due to misleading numbers to do with credit ratings.

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