Overlooked at Cisco's Party

NEW YORK (TheStreet) -- The media mentioned the good, bad and ugly on Cisco (CSCO), but mostly focused on the good.

Cisco's fourth quarter edged expectations in a difficult environment for corporate and government spending. They apparently enjoyed a bit of strength toward the end of the quarter and raised their dividend. Though we can debate the use of cash on a dividend, that's all good -- at least as far as the after-market traders were concerned and the media commonly takes their cues from them.

Two items, though, bordered the bad and ugly and were largely ignored by the media. Cisco, which has been cutting jobs to ribbons, benefited from lower costs. That makes for better profits, but it's not sustainable and often comes harnessed to a long-term negative impact.

And speaking of cutting to ribbons, Cisco has been doing it to prices of their products, in order to compete with the likes of Hewlett-Packard (HPQ) and Juniper (JNPR). That is a huge variable. A company that can increase or hold prices in check is operating from a position of strength. When prices start dropping like stone, it often bodes poorly.

Much of the media mentioned job cuts, if relegated to an afterthought in the after-market celebration that sent Cisco's stock up 5%. Few mentioned the prices -- and you can put articles by everyone from Seeking Alpha to The Wall Street Journal in that category.

Bloomberg did well to let traders know what was really happening. Their lead made it clear:

Cisco, the biggest maker of computer-networking equipment, reported quarterly profit and sales that topped analysts' estimates as job cuts kept costs in check and price reductions attracted customers.

And they were soon talking about those cost cuts that can't last and might have a downside:

The job cuts kept costs in check, contributing to a 3.8 percent drop in operating expenses in the just-ended fiscal year.

Remember: not all quarters are created equal. One built on the backs of price and jobs cuts is not quite as good.

At the time of publication, the author had no positions in any of the stocks mentioned in this column.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page.

For his "Business Press Maven" column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers.

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