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Cisco Systems (NASDAQ: CSCO) comes in and reports a very, very nice quarter. Superb year-over-year growth in earnings and revenues. For a company approaching $40 billion of revenues, any kind of growth higher than 10% is just awesome. Cisco is forecasting growth better than 15% going forward. Yet, this technology leader has been the catalyst for today's massive sell-off, primarily in NASDAQ stocks. So, what happened?
Cisco CEO John Chambers, also known as the cheerleader-in-charge, said on the earnings conference call that financial institutions were slowing down with their respective IT spending. Cisco is big enough and diverse enough not to let that fact upset its future outlook. Cisco is not dependent on any one geography or sector to make or break its numbers. The message however, was daunting to the other technology names.
For the first time this year, we are witnessing the sell-off of the real winners of the year. The revenue and earnings growth for Apple (NASDAQ: AAPL), Research in Motion (NASDAQ: RIMM), Google (NASDAQ: GOOG), and Intutive Surgical (NASDAQ: ISRG) have been beyond any analysts' expectations. But even the secondary performers like Oracle (NASDAQ: ORCL), Hewlett-Packard (NYSE: HPQ), Cisco itself, and Microsoft (NASDAQ: MSFT) are also coming down today. Technology has been the safe place to hide this year, as these giants sell globally and were the benefactors of a weak dollar and global growth.
John Chambers spooked this group because no one really spoke of, at least openly, of the financial sector paring back its IT spending. The financial sector has been renown for buying cutting-edge technology, and lots of it. Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) are well-known among the institutional investing community to be the beta-testers of choice for new technology toys and systems. Technology analysts love to speak with financial institutional IT professionals, as they are the first to see new tech gizmos!!
When the dust settles, I believe we will see continued growth from Apple, Google, and RIMM. Intuitive Surgical is of course a non-technology name. These companies are not dependent on massive enterprise-wide purchases and deployments. These names were up a lot for the year and became an easy place to lock-in profits for the year for many investors.
Georges Yared is the CIO of Yared Investment Research and the author of "Baby Boomer Investing...Where do we go from here?"
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Reader Comments (Page 1 of 1)
11-08-2007 @ 11:23PM
maximum peved said...
john boy,,, is the VILLAGE IDIOTT of all TIME..
he needs to be >BEATEN DOWN< BADLY !!!
11-09-2007 @ 9:41AM
larrynorm said...
Chambers should resign since he no longer has faith in his company.
11-10-2007 @ 5:06AM
matsa said...
Why should Apple be affected because financial sector invests less???? I don't thinke the majority of iPods, iPhones, iMac and Macbooks are sold to the US financial sector???? HELLOO!!!
11-12-2007 @ 12:26AM
Beltway Greg said...
RIMM for the hills.
This stock is about to get a severe haircut down to $70-80. It's Sunday evening 11-11-07 abt. 12:00 a.m. and the Asian markets are down 3-4%. All tech Apple, down to $150 and Google down about another $100. Does it make sense? Yes. Remember 2000. Before we had the major blowouts the indices started to whiplash back and forth until only SUNW stood and finally it cratered. Most tech stocks today have real earnings. Good news. The problem? The year end Wall Street bonus save and the fact that everything else is going down so we've got to show something for the year by selling what's worked. Logical depending on where you stand. I predicted Apple at $200 within twelve months back in June. Before all of the subprime disasters I thought it might reach that point by Jan. Now I think it will reach $200 but not until June 2008 and then only if the American consumer keeps consuming. You know we could see the Dow at 12000 or less in the next two months.
Beltway Greg