Wednesday, August 11, 2010

Cisco Comments Indicative Of Economy That Is Just Bumping Along

Cisco's (CSCO) earnings release and comments after the market close is indicative of an economy that is just bumping along with weaker growth. See the August 2010 comment that Chambers today. The forecasting foresight of John Chambers during other significant economic turning points and pulled together by Reuters is outlined below.

I do believe we will be in this uncertain economic environment until there is more clarity on the regulatory and tax environment that is coming out of Washington. This may not be visible until November; however, the market is pretty good at predicting what the future holds and is likely to react a month or two in advance of November.
CHRONOLOGY-Cisco CEO John Chambers' comments on the economy
6:42 PM Eastern Daylight Time Aug 11, 2010

NEW YORK, Aug 11 (Reuters) - Cisco Systems Inc Chief Executive John Chambers said there was "unusual uncertainty" in the economy and gave a revenue forecast that was below Wall Street expectations, sending shares tumbling. Chambers, one of Silicon Valley's longest-serving executives, is considered a good reader of industry trends. He was one of the first executives to flag the impact of the financial meltdown on the technology sector in late 2007.

Here are some of Chambers' comments in recent years.

AUG 2007
"I have been in this business for 30 years ... It's the strongest global economy I have been a part of."

NOV 2007
Chambers warned of "dramatic decreases" in orders from U.S. banks.

FEB 2008
Chambers said orders slowed rapidly from December to January in the United States and Europe. "It's the most cautious I've seen CEOs in the U.S. and Europe in many years."

MAY 2009
On customer sentiment: "You can call it stability, you can call it leveling out ... for the first time many of them feel something solid beneath their feet as opposed to going into deeper and deeper water."

FEB 2010
"In our opinion Q2 marked the second phase of the recovery with additional across-the-board acceleration -- in other words, balance across the board -- in all of our geographies and market segments."

MAY 2010
"Given all the uncertainties regarding the strength and shape of the recovery, concerns about the recovery possibly slowing and the unknown extent of job creation, we encourage you to wait for additional economic data before becoming too optimistic."

"We are seeing a large number of mixed signals in both the market and from our customers' expectations, and we think the words 'unusual uncertainty' are an accurate description of what is occurring."
In this environment, equity investors should focus on higher quality companies that have strong cash flow and lower debt levels. Many of these companies pay growing dividends and hold up better during down market periods.

1 comment :

Settembrini said...

When(If) CSCO goes Under $21 I'll be there. HPQ under $40 and XLNX are just a few Tech's on sale.
Xilinx downgraded to underperform by BMO Capital after Xilinx Beats as Profit Quadruples and Guidance up? Picked up some today. Great blog. thanks for all the info u provide