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Market Deserves More Credit for Cisco's Rally

The business media attributed Cisco's after-market jump to a slight earnings beat instead of to the market's happy-go-lucky day.

It's too bad that in the coverage of an adequately decent quarterly report by Cisco (CSCO) - Get Cisco Systems, Inc. Report, we see a few basic examples of the business media's not telling the whole story. In some cases, they were too positive. In others, they weren't positive enough.

Let's go to the videotape. Uh, I mean to the pixels.

Excluding special items, Cisco's earnings were a penny ahead of the 39 cents expected, and revenues, at $10.4 billion, were a hair better than the $10.3 billion expected. The company was a bit cautious going forward, though not as cautious as some had feared. The point, though, is that this is not your grandfather's Cisco anymore -- and that's a good thing, because it helped save the company.

They Just Don't Get Cisco!

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But read


coverage of the quarter

, and you'll think it was only the old Cisco standby -- the router and switch business -- that spurred the company on to its modest passing of expectations in both top- and bottom-line results. In fact, you won't come across references to anything other than the router and switch business unless you stay awake until the last two sentences.

A central part of the story here, though, is that the traditional router and switch business, which accounts for nearly two-thirds of revenue, grew in the single digits whereas the teens had been the norm -- and Cisco still lived to tell about it. The company even beat expectations. This is good news and should be spelled out, not remanded to an afterthought.



remanded, leaving it to

The Wall Street Journal

to spell it out:

"To offset some of the pullback, Cisco has broadened its product line beyond an original speciality in switching and routing devices. The company has been among the most aggressive acquirers in the high tech industry, assembling engineers and programmers from start-ups to push further into markets such as social networking, online video and conferencing."

In that aspect,

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treatment of Cisco's earnings was not as positive as it should have been, failing to recognize the significance of the company's beating expectations without relying as heavily as usual on its standby business to do so.

But in another aspect, the business media shed Cisco's earnings in too-positive a light, siding with the small beat of expectations in the quarter just passed vs. the small notes of caution the company laid down about the future.

The Wall Street Journal


a clear choice

, leading with the headline"Cisco Profit Climbs 4.4% on Sales Growth" and subordinating this to the subheadline: "Chief Sees Uncertainty Over Economy Lingering for Next Few Quarters."

This is not uncommon, nor totally inappropriate. But in all articles that are more positive than not about a company that obviously reported just-better-than-expected earnings, you, the savvy investor, should decide where that positivity stems from. Is what you're reading colored, for example, by a particularly good day in the stock market?

In this case, while many articles were positive and mentioned the excited reaction to Cisco's results by after-market traders, few -- not even

The Wall Street Journal

in an otherwise-decent article -- mentioned the market's mighty Tuesday and made the connection (implicit or otherwise) with how that might have made everyone from traders to journalists accentuate the positive.


even ran an article

speculating on why Cisco did so well

in after-market trading despite the fact that its report was just decent. The headline of the article was "Does Wall Street see a bottom for Cisco?" with the subheadline "Commentary: Tech giant gets after-hours boost despite ho-hum report."

But while there was plenty of speculation about CEO John Chambers' salesmanship ability (the article even ended with a reference to investors liking "Chambers' southern boy charm"), there was not a word about the market's happy-go-lucky day.

Chambers, don't forget, was one of the first in the technology field to be cautious, and going out, Cisco was so cautious it was not even giving forecasts for very far into the future. If he really were just a Southern boy seeking to charm investors from their wallets for short-term gain, he could have done better than that.

No, a big reason why Cisco was greeted with flowers and chocolates for a good-not-great report was the day it came on. It's at least worth a simple mention.

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

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. Fuchs appreciates your feedback;

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