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Cisco’s shortfall an omen for rest of tech world
Question of the Day
Two technology heavyweights slated to report their earnings in the next few weeks are Dell Inc., which reports next Thursday, and Hewlett-Packard Co., which reports Nov. 22.
Cisco shares fell $3.97, or 16 percent, to close Thursday at $20.52. Dell fell 56 cents, or 3.9 percent, to $13.93, and HP shares lost $1.06, or 2.4 percent, to $43.10. Shares in IBM, EMC and Xerox each fell by about 1 percent, while Intel rose nearly 1 percent to $21.21.
Jayson Noland, an analyst with Robert W. Baird & Co., said he hadn’t heard worries from Cisco resellers about the strength of those orders prior to Cisco’s earnings report Wednesday for the fiscal first quarter. He noted that federal spending has remained strong, but that it now appears that states and municipalities are imposing the same kind of deep cuts that corporations imposed at the start of the recession.
“When something goes wrong in the corporate world, they lock it up quickly,” he said in an interview. “I don’t feel like state and local governments really act until it’s the 11th hour.”
The cuts are likely to spill over into other sectors beyond technology, he added. While some portion of Cisco’s weaker-than-expected guidance can be chalked up to company-specific problems _ such as apparent losses in market share for cable set-top boxes, which represents a small fraction of Cisco’s total business _ Noland said the results paint a troubling picture for other technology companies.
“Cisco is big enough, and that miss was bad enough, that it’s hard to argue that it’s just company-specific,” he said.
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