Cisco Forecast - Always Sunny, No Rain
NEW YORK (
) --As the tech sector slides into another fear-fed selloff, investors await word from
Cisco's
(CSCO) - Get Cisco Systems Inc. Report
chief John Chambers about the health of the tech-driven economy.
Cisco Earnings Preview
Cisco reports after the bell Wednesday --
TheStreet
will be live-blogging the earnings call -- and while analysts expect a solid fiscal fourth quarter performance with 42 cents in adjusted earnings on sales of $10.88 billion, more than ever, it will be the Chambers outlook that sets the tone for tech.
One thing Chambers has going for him: the bar is fairly low in terms of expectations.
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A customary Cisco penny beat and big dose of Chambers' usual cautious optimism may be just enough to put the current panic in check, at least for a while. And as for worst case scenarios, don't worry. Cisco is blind to downturns.
The odds that Chambers will predict a disaster are very slim. His track record is strong here. He
TheStreet Recommends
missed the signs of the bursting Internet bubble
in 2000, and he
in April 2008, ignoring the recession and collapse of
Bear Stearns
a month earlier.
In Cisco's defense, the network equipment business is based on supplying long-range contracts and booking new orders at a fairly predictable rate. Troubles, like order cancellations, usually don't emerge until it's too late.
Instead, Chambers is likely to focus on the global growth opportunities and the 1,000 or so new hires Cisco has made to gear up for the new challenges.
Investors will then wonder about how well Cisco is balancing expenses with sales. The gross margin expectation is about 64%. Anything dramatically lower will set off alarms.
But again, the bar is low. Wall Street expects Cisco's current quarter, ending in October, to be about flat sequentially compared with the July quarter with earnings of 42 cents on $10.95 billion in revenue, according to Yahoo! Finance.
Missing a low bar, however, can be quite devastating in
. Cisco shares were down 3% at midday Wednesday as investors brace for a stalled recovery.
--Written by Scott Moritz in New York.
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