The buzz of the late-summer rumor mill is threatening to drown out the hum of the
Investors will be expecting to see strong sales from the tech giant after the market closes Tuesday, when Cisco is due to report fiscal fourth-quarter earnings. But while the numbers will be featured in the company's prepared remarks, there's a showstopper in the wings should executives offer any comment on reports that Cisco and
are in talks.
Speculation of a potential megadeal between the San Jose, Calif., computer networking shop and Nokia, the world leader in cell phones, began after U.K. paper
The Sunday Business
reported that the two companies were in talks.
Nokia has denied the story, and Cisco has been mum. Analysts dismissed the idea, largely because Nokia's consumer handset focus is far outside Cisco's tradition of niche tech acquisitions. But investors seemed mildly intrigued by the speculation. Nokia shares were up 22 cents to $16.16, while Cisco shares dipped a nickel to $19.25 Monday.
The rumor hits just as Nokia and Cisco have reshuffled top management. Hard-charging Finnish CEO Jorma Ollila said last week he was leaving Nokia to run
Royal Dutch Petroleum
next year. And last month, Charlie Giancarlo was
thrust into Cisco's No. 2 job as head of corporate development.
Observers say the high-level movement helps feed the notion that big changes could be in the works.
Giancarlo "may prefer a bolder M&A strategy given his new role and the Linksys deal he led," wrote UBS analyst Nikos Theodosopoulos in a research note Monday. Linksys, a WiFi networking outfit, was Cisco's first acquisition of a consumer electronics business.
"Even so," Theodosopoulos continued, "we believe he would not push for a deal with Nokia."
So lacking any deal talk, investors will have to mull over the financials.
Last time around, Cisco had a good showing, having finally cracked the telecom market, a big growth area outside the stagnant corporate computer networking market.
Cisco is expected to have built on that momentum with a strong fiscal fourth quarter, but JP Morgan Chase analyst Ehud Gelblum cautions that the real tell will be in Cisco's fiscal first-quarter outlook.
Analysts are expecting Cisco to post earnings of 25 cents a share on sales of $6.6 billion for the fiscal fourth quarter. For the current quarter, ending in October, analysts are expecting flat sequential results.
The concern among investors is that Cisco could point to a seasonally slow sales period or a downshift in demand from phone companies and lower guidance for the fiscal first quarter.
Of course there's always the chance that Cisco could say something that keeps the Nokia speculation front and center, making these numbers a bit of an afterthought.