This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Cisco Craters, Ends Tech Sector Streak

-- Cisco's slowdown warning story updated with analysts' comments.

NEW YORK ( TheStreet) -- Cisco's (CSCO - Get Report) slip took down a big swath of tech sector and the broader market with it Thursday.

Cisco felt the painful pinch of government budget cuts and crimped cable TV box demand and slashed its full year sales outlook $1 billion below street estimates.
Cisco CEO John Chambers

The warning of a renewed spending slowdown crushed Cisco shares and set off alarms across the industry.

Tech stocks, aka the Nasdaq, had enjoyed a 15% rise over the past three months as giants like Apple (AAPL - Get Report) and Google (GOOG - Get Report) delivered blowout third-quarter sales. But that run looked done Thursday.

Some see the stumble one of Cisco's own making.

"We believe the order shortfall could be more than the 'air pocket' described by Chambers, and instead could be the first signal that Cisco is losing share in several of its core markets as its focus on growth has diverted attention from its core businesses," Morgan Stanley analyst Ehud Gelblum wrote in a note Thursday. "We can't find one other company -- big or small -- that's seeing similar weakness."

Other analysts were more direct and pointed to Cisco lack of leading technology in its main routing and switching business.

"The times are changing at the public and enterprise levels," said Telecom Pragmatics analyst Sam Greenholtz. "Wall Street and others might be getting an understanding of the dynamics that are reshaping the network world."

Still, Cisco's unusually broad exposure across world economies and its diversity of customers including businesses, schools and governments puts CEO John Chambers in a fairly unique position to comment on order trends. And even though his forecasting skills may be sketchy, his ability to spot the obvious weaknesses tends to inform investors.

Shares of Cisco started selling off Wednesday evening and the rush only intensified later sending the stock down 17% Thursday.

The bleak macroeconomic picture drawn by Cisco suggests other communications equipment suppliers like Alcatel Lucent (ALU), Juniper (JNPR - Get Report) and Ciena (CIEN) may also start to see a slide in orders from government customers.

Cisco parts suppliers and chipmakers like PMC-Sierra (PMCS), Anadigics (ANAD), Broadcom (BRCM) and Marvell (MRVL) were flagged by analysts as shops that could feel the chain reaction as Cisco gears down production.

But probably the worst news from Cisco's conference call was reserved for the cable equipment sector. Cisco noted a 40% year-over-year decline in set-top box sales. Though Chambers alluded to the ongoing slowdown in new home construction and the steady subscriber losses among cable providers, the message was clear: the cable gear sector is in trouble.

The closest competitor in set-top boxes is Motorola (MOT), which saw its shares fall 3% in the Cisco aftermath.

Other cable equipment suppliers like Arris (ARRS) and Harmonic (HLIT) were down 3% as well, as investors sniffed a spending slowdown in the wind.

--Written by Scott Moritz in New York.

>To contact this writer, click here: Scott Moritz, or email:

To follow Scott on Twitter, go to

>To send a tip, email:


Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.16 0.49%
CSCO $24.90 0.89%
GOOG $688.05 0.72%
JNPR $21.63 -0.32%
FB $102.95 1.00%


Chart of I:DJI
DOW 15,888.51 +228.33 1.46%
S&P 500 1,849.72 +20.64 1.13%
NASDAQ 4,298.3630 +31.5260 0.74%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs