Contrast, for the moment, Cisco with other stocks in the old-tech cohort: Microsoft (MSFT), Oracle (ORCL) and Intel (INTC). These are all huge companies facing, in many ways, almost identical macro challenges. The big difference is that unlike Cisco, none of these companies has the wind at its back. Microsoft and Intel are all personal-computer based, still, and don't even have good mobile offerings. Oracle is the high-cost software producer -- at least to the client -- that is getting hurt by software-as-a-service cloud plays as well as a terrible decision to go big into hardware, which is still hurting them.
Cisco, on the other hand, is playing in the cloud, playing in mobile, playing in security, playing in bring-your-own-device storage and in what Chambers calls the "the Internet-of-everything space." I think that Intel and Microsoft are in secular decline because of their PC base and Oracle is in secular decline because of the cloud.
Cisco, unquestionably, is in secular growth mode. What Chambers did on the call last night is insert a downbeat cyclical outlook into a secular growth story. Given how few big-cap secular growth stories there are, Cisco suffered from a secular-deprived funnel that put too much hot money into a company that still has more cyclicality than we like. Making matters worse, companies like Ciena (CIEN) and Finisar (FNSR) and Juniper (JNPR) didn't share the downbeat vision, making us wonder whether Cisco is losing share even as Chambers repeatedly told us it isn't.
So, he filled in the gap by highlighting the negatives and by doing so he knocked slightly more than a full multiple point off the stock. The multiple is now the same as all of those other stocks I just ran through, even as Cisco's in secular growth mode and they are all in secular decline.That's why the stock has to be bought at $22-23 and not sold. After this downbeat-outlook-inspired decline, the stock's too cheap vs. its cohorts. It is hard for me to imagine the stock going under those multiples. Now, let's put it another way. Hewlett-Packard's (HPQ) the best-performing large-cap tech stock of the year, up a mammoth 90%. That's because it was supposed to be in steep and perhaps terminal secular decline. Then the company reported a couple of quarters that called its obituary into question. So it has had a remarkable run-up.
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