NEW YORK ( TheStreet) - With shares of Juniper ( JNPR) spiking up 7% recently on better-than-expected fourth-quarter results, those who have been waiting anxiously to revive the debate as to whether Juniper is better than Cisco ( CSCO) have finally gotten their chance. Except - there's no discussion to be had. That ship has sailed.
While Cisco has become a punching bag for analysts lately, very few of them actually demonstrate a clear understanding of what Cisco is and where the company is trying to go. And the rush to panic over one quarter seems overdone. While Cisco is far from the heights it achieved in the dotcom era, this is still a high-quality company trying to navigate a soft corporate IT spending environment.
To that end, the Street still refuses to accept that growth is not coming back - at least not any time soon. And let's stop pretending for a moment that any growth this company produces will ever be enough. As a mature dividend payer, management's real challenge at this point is obvious; Cisco needs to demonstrate that it can establish strong competitive leverage by posting better margins.
Management understands this. And they have outlined several strategies to boost long-term profits. The Street, meanwhile, have conveniently misinterpreted management's attention to the bottom line as "Cisco abandoning growth." And these shares, which have been down by as much as 10% since the company reported its fiscal first-quarter earnings results, are still feeling some pressure.
The fear these days is that Cisco is losing market share to Juniper and F5 Networks (FFIV) when in actuality, the entire sector has underperformed due to shrinking enterprise budgets. Cisco has countered this weakness by resorting to "aggressive discounting" of some of its gear. I believe this made sense. Reducing prices helps level off inventory while at the same time squeeze out smaller rivals. The thing to remember, though, is that it will come at the expense of near-term margins.