Wednesday, February 4, 2009

Seeking Clues on Tech Sector From Cisco

By BEN WORTHEN Investors will be watching Cisco Systems' results Wednesday for signs that the drop in tech spending has bottomed out. Not many expect to find them. The San Jose, Calif., networking giant is a particularly important bellwether for the tech sector, because of the range of its hardware and software products and because its customers span the globe. Cisco also closes its books faster than most companies, reporting results Wednesday for the second fiscal quarter ending Jan. 24. That gives investors an early look at tech sales for January. The quarter isn't likely to be pretty. Cisco Chief Executive John Chambers said in November that he expected revenue for the period to decline 5% to 10% year-over-year, and investors tend to bank on the company's statements. Analysts surveyed by Thomson Reuters are expecting the company to report earnings per share for the quarter of 30 cents, excluding items, and around $9 billion in revenue, down from 38 cents a share and $9.8 billion a year ago. The more critical number will be guidance for the current quarter. In a market where not-so-bad news can be good news, Cisco could help the Nasdaq maintain its recent relative buoyancy if its sequential decline in revenue doesn't dip too low -- by more than 2%, analysts say, and if Cisco shows it is controlling costs. Tech's outperformance may signal that investors expect an economic recovery later this year, which would boost demand for products by Cisco and others. Or it could be another false start. Cisco's outlook for business demand could help investors decide which one it is.

No comments: