Cisco's Spending Plan Can't Save Shares
10/15/08 - 12:51 PM EDT
James Rogers
Cisco's (CSCO Quote - Cramer on CSCO - Stock Picks) plans to boost its technology spending -- despite the ongoing econmic slump -- were unable to bolster its shares Wednesday, as the networking giant's stock joined the broader market's downturn.
According to various media reports, CEO John Chambers told a Gartner event audience late Tuesday that the company will increase its tech spending by 10% next year. Cisco needs to increase its tech budget to cope with demand for a slew of emerging technologies, he explained. Despite the current economic malaise, Chambers is bullish about Cisco's prospects, highlighting technologies such as virtualization and cloud computing as key drivers behind the company's spending Tuesday. Cisco has already partnered with VMware (VMW Quote - Cramer on VMW - Stock Picks) to support virtualization, a technology which is used to expand computers' physical capacities, and Chambers also wants to boost the company's Web-based "cloud" services. Chambers also warned his audience that broader IT spending will depend on individual companies' philosophies, explaining that some firms see technology as an expense to be cut whereas others recognize its value as a "competitive advantage." Despite Chambers' confidence, Cisco itself is hardly immune to restructuring; the company is reportedly planning 129 job cuts at its facility in Richardson, Texas. Jefferies lowered its price target Monday on Cisco's stock to $24 from $30, citing high levels of economic uncertainty, although the analyst firm maintained its buy rating. Shares of Cisco were recently off 85 cents, or 4.6%, to $17.69. The stock has lost nearly 50% of its value in the past 12 months.
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