Computer-networking icon Cisco Systems (NASDAQ: CSCO) is trying to cut costs wherever it can. In a sign of the times, Cisco will shut offices for four days during the Christmas/New-Year period in an effort to defend its profit margins (critical operations will remain open). Other tech companies that are trying to utilize time off for employees as a way of saving money include Apple (NASDAQ: AAPL), Hewlett-Packard (NYSE: HPQ) and Adobe (NASDAQ: ADBE).

When I read headlines like this, it makes me doubt the current rally we've seen in the markets. Indeed, bear-market rallies are common when things get way oversold. Then the euphoria gets put in perspective when we realize that it's going to be a long time until the economy truly finds its way back into a cycle of growth.

Businesses like Cisco will suffer from declining top-line sales as its customers become increasingly conservative with their investment capital. At that point, the only defensive move is to cut costs. And that's not a great position to be in. It limits management's ability to run operations, and it sends a bad message to Wall Street. Like some people have been saying, tools such as cost-cutting and layoffs aren't necessarily being perceived as positive elements in this cycle; they only serve to accentuate the dread of the slowing global economy.

Shares of tech giant Hewlett-Packard (NYSE: HPQ) are getting a nice lift today after the company surprised Wall Street by lifting its fourth quarter estimates this morning.

Before today's announcement, analysts had been expecting the company show earnings of $1.00 a share when it announces its official numbers next Monday (Nov. 24), but the company stated today it is now expecting to show adjusted earnings of $1.03.

The decision to lift its forecast has resulted in some nice gains for HPQ shareholders today, as the stock has traded up 10.5% to $32.41, and earlier in the session hit an intraday high all the way up at $33.84.

According to today's announcement, the company is benefiting from "global reach, diverse customer base, broad portfolio and numerous cost initiatives."

This is the fourth in a four part series which I hope gives buyers, sellers, shareholders and dare I say management a platform for discussion.

This week I envisioned an eBay (NASADQ: EBAY) without Skype, eBay Motors and Paypal. Everything goes to the highest bidder, excluding handling and delivery of course.

While EBay might benefit from selling Skype and Motors, considering they might be worth more to others like Cisco Systems (NASDAQ: CSCO) and AutoNation Inc. (NYSE:AN), it should not sell PayPal unless it is contemplating a merger, since the acquiring company most likely would want PayPal to be an integral part of any deal.

Ebay is going through some growing pains right now but it is still a primary center of activity on the web. Although there are many disgruntled sellers that have left the site or been forced off because of the constant changes in the rules, it really has only one main rival and that is Amazon.com (NASDAQ: AMZN).

Shares of VMware Inc. (NYSE: VMW) are headed lower today following a downgrade from Merrill Lynch. The brokerage firm cut its rating on the equity from Buy to Neutral due to valuation concerns; VMW has added more than 60% since its October 21 earnings report. Merrill maintains a $31 price target on VMware, which represents a premium of just 1.4% to the stock's closing price on Tuesday.

It's shaping up to be a rough week for VMW. Yesterday, the tech stock sat out a broad-based rally in the equities market, and slumped to a daily loss of nearly 4% as word hit the Street that Intel (NASDAQ: INTC) chopped its VMware stake in half. Specifically, Intel unloaded about 4.75 million of the 9.5 million VMW shares it purchased in July 2007. According to a regulatory filing, half a million shares each were sold to Cisco Systems (NASDAQ: CSCO) and EMC Corp. (NYSE: EMC) -- the latter of which already owns a majority stake in VMW.

With VMW shedding nearly 6% out of the gate this morning, it seems likely that the shares will add on to their year-to-date slump of more than 64%. The stock continues to find resistance from its 10-week and 20-week moving averages, and a reversal of optimism among option traders could accelerate the equity's decline. During the past 10 days, investors on the International Securities Exchange have bought to open nearly two times more calls than puts on VMW.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Many of us would be happy to benefit from a quiet retirement without facing concerns of losing all of our hard earned money. Fortune 40 gives us a helping hand by suggesting some big names to invest in that could offer us the results that we are looking for.

One such company is Abbott Laboratories (NYSE: ABT), whose earnings surged 35% during its last quarter, helped by its famous anti-inflammatory drug Humira and HIV treatment Kaletra. Looking ahead to the company's performance, CEO Miles White is planing to keep his main attention on its medical devices unit which is seen as a key element against strong competition.

Fortune 40 also looks at beverage maker The Coca-Cola Company (NYSE: KO), which benefits from strong international gains able to beat recent weakness in U.S. In addition, it looks like the company's acquisition of Glacéau and its VitaminWater brand offer it a good support to outperform on the market.

Cisco Systems (NASDAQ: CSCO) shares are falling after an analyst at Barron's expressed concern over CSCO's Q3 earnings (subscription required). In a column in Barron's, the analyst said that after considering disappointing earnings from competitor Sun Microsystems (NASDAQ: JAVA), he is worried that CSCO will not meet revenue growth expectations. CSCO reports Tuesday after market close. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CSCO.

After hitting a one-year high of $34.24 in November, the stock hit a one-year low of $21.77 in February. This morning, CSCO opened at $26.46. So far today the stock has hit a low of $26.15 and a high of $26.71. As of 12:35, CSCO is trading at $26.32, down $0.43 (-1.6%). The chart for CSCO looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $30 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.6% return in eleven weeks as long as CSCO is below $30 at July expiration. Cisco would have to rise by more than 14% before we would start to lose money.

CSCO hasn't been above $30 since November and has shown resistance around $27 recently. This trade could be risky if the company's earnings (due out tomorrow after the close) are a positive surprise, but even if that happens, this position could be protected by resistance CSCO might find at its 200 day moving average, which is currently around $28 and falling.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in CSCO or JAVA.

MAJOR PAPERS:

• A newly published report by Standard & Poor's said that the performance of organizations such as Federal National Mortgage Association (NYSE: FNM), or Fannie Mae, and Federal Home Loan Mortgage Corporation (NYSE: FRE), or Freddie Mac, could directly affect the U.S. economy and the country's credit rating, especially if they have to be rescued by the government, according to the Wall Street Journal's "Credit Markets" column.
• Seagate Technology LLC (NYSE: STX), a hard drive maker, filed a patent infringement suit in San Francisco against STEC Inc (NASDAQ: STEC) over four patents related to technology used to store data on computer chips, the Wall Street Journal reported.
• The Financial Times reported that Citigroup Incorporated (NYSE: C) is allowing private equity groups such as Apollo, The Blackstone Group LP (NYSE: BX) and TPG that are bidding for up to $12B of its leveraged loans to 'cherry-pick' from a wide range of assets with different credit ratings and prices.

WEB SITES:

• According to analysts, Reuters reported that technology industry leaders that include International Business Machines Corporation (NYSE: IBM), Oracle Corporation (NASDAQ: ORCL), Cisco Systems Inc (NASDAQ: CSCO) and Hewlett-Packard Company (NYSE: HPQ) are among the companies with large cash reserves that could be used to fund acquisitions.

Generally, one would not list a tech stock as a defensive play. Cisco Systems may be an exception.

Two fundamentals warrant the advocacy of Cisco Systems (NASDAQ: CSCO) as a defensive play: 1) the company is the world's largest supplier of computer internet-network systems, and 2) emerging market growth. So long as the internet remains intrinsic to business processes in emerging and developed markets and so long as emerging markets continue to grow, Cisco will benefit in the years head. Analysts project a roughly 12-15% annual revenue growth rate for CSCO for 2008-2009. Another positive: look for CSCO's advanced technologies unit to continue to contribute impressively to the company's revenue, on video system business.

Further, skip (for now) the debate regarding the possible 'broadband shortage' and focus instead on the counterargument. Assume deteriorating conditions in the U.S., perpetually high energy prices slowing global growth, and increased protectionist sentiment. The impact on Cisco? Most likely, CSCO keeps growing, albeit at a slower rate, but it will grow, nonetheless. The Reuters F2008/F2009 EPS consensus estimates for CSCO are $1.52/$1.69.

A Morningstar advertisement asking "Is The Market Cheap Yet? We Think It Is" got my attention in a recent issue of Barron's. Promoting its Equity Research service, Morningstar discusses the NASDAQ sell-off this year, stating that in July of 2007 the market was 6% overvalued, but now it is 15% undervalued.

The ad goes on to state that eBay (NASDAQ: EBAY) is trading at a 41% discount to Morningstar's estimate of value and that Cisco Systems (NASDAQ: CSCO) is trading at a 35% discount. At the time, eBay was trading at $28.81, but it closed at $25.72 yesterday making the stock 52.7% undervalued by their measure. Cisco was then $24.94 and last night closed at $23.99, so it is now 38.8% below fair value.

Hewlett-Packard Co. (NYSE: HPQ) stock is falling with most other tech stocks this morning after Cisco Systems (NASDAQ: CSCO) issued a 10% sales growth forecast for its current quarter, which was well below estimates of 15 percent growth made by analysts. The forecast sent CSCO shares slipping and seems to have investors worried that a recession would hit the tech sector hard. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on HPQ.

After hitting a one-year high of $53.48 in November, the stock has declined steadily following a brief spike in December. This morning, HPQ opened at $41.80. So far today the stock has hit a low of $40.61 and a high of $42.16. As of 10:45, HPQ is trading at $41.00, down $1.16 (-2.8%). The chart for HPQ looks bearish but improving slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider a March bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in six weeks as long as HPQ is below $45 at March expiration. HPQ would have to rise by more than 9% before we would start to lose money.

HPQ hasn't been above $45 since early January and has shown resistance around $44.50 recently. This trade could be risky if the economy turns around quickly, but even if that happens, this position could be protected by resistance HPQ might find around $45, where the stock topped out twice in the past month.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in CSCO. He does control a bullish position in HPQ.

MOST NOTEWORTHY: Cisco Systems, Virgin Mobile and Polo Ralph Lauren were today's noteworthy downgrades:

• JP Morgan downgraded shares of Cisco Systems Inc (NASDAQ: CSCO) to Neutral from Overweight following its Q2 results, as they believe the company's international exposure is not enough to offset slowing in North America and Europe. Shares were also downgraded to Neutral from Outperform at Baird, citing the meaningful slowdown in fundamentals.
• Lehman downgraded Virgin Mobile USA Inc (NYSE: VM) to Equal Weight from Overweight based on reduced visibility following its Q4 report.
• Polo Ralph Lauren Corporation (NYSE: RL) was lowered to Hold from Buy at Citigroup, as they believe the company is facing fundamental challenges in key markets and a lack of visibility on the Japanese market. They see more upsideelsewhere.

OTHER DOWNGRADES:

• Bear Stearns downgraded BT Group Plc (NYSE: BT) to Peer Perform from Outperform.
• Think Equity lowered Napster Inc (NASDAQ: NAPS) to Accumulate from Buy.
• UBS downgraded Elbit Systems Ltd (NASDAQ: ESLT) to Neutral from Buy.

Cisco Systems, Inc. (NASDAQ: CSCO) and other tech stocks are trading higher today after competitor IBM (NYSE: IBM) indicated in a preliminary earnings report that its fourth-quarter earnings rose 24% from a year ago to $2.80 per share, beating Wall Street expectations of $2.60 per share. IBM said that the weak dollar contributed to higher revenue for the quarter. Tech stocks are rising on the whole as investors get their hopes up that others might see the same lift from international sales. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CSCO.

After hitting a one-year low of $24.82 in March, the stock hit a one-year high of $34.24 in November. CSCO opened this morning at $26.59. So far today the stock has hit a low of $26.20 and a high of $26.67. As of 10:45, CSCO is trading at $26.46, up %0.59 (2.3%). The chart for CSCO looks bearish but improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

When it comes to M&A, few have as much expertise as Cisco (NASDAQ: CSCO). But recently, the serial acquirer has been buying up some odd companies – small social networking firms, such as Five Across and Tribe.

Now we are seeing some of the results of these deals: Cisco is launching a new software platform called Eos, according to a report in the Wall Street Journal. Basically, Eos is an entertainment operating system that will help companies build social networks. Cisco plans to deliver Eos via the Net, not installed software. The business model will entail a subscription fee.

To get some background on this, I had a chance to interview Erick Brownstein, an expert on social networking and operates the Social Media Method blog:

"Cisco's trend antennae have been up, and they are wisely betting on the future of social media. They are combining all of the 'right' ingredients with their content-agnostic, white-label Eos platform. It's not just video and entertainment, but special interest and lifestyle. The data mined will guide not only behavioral advertising, but Amazon (NASDAQ: AMZN)-style recommendations as well. It'll be interesting to see what other elements they bring into the mix. There's clearly plenty of room out there for a company like Cisco to hold the hands of traditional media companies -- and mid- to large-sized companies across many industries -- that are trying to navigate through the social media landscape."

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

When Cisco Systems (NASDAQ: CSCO) CEO John Chambers said this year that he was not planning on retiring from the top spot at the company he's led for quite a while, prospective mental exit flags started popping up. You see, there are some executives that wait a career or more to ascend to the CEO spot but get sidetracked when a CEO like Oracle's (NASDCAQ: ORCL) Larry Ellison or Cisco's John Chambers settle in for a decade or more of sitting in the corner office.

Such is life, but it's caused two high-profile C-level defections from Cisco this year -- the latest having been announced yesterday. Charles Giancarlo, a 14-year veteran of the company and the Chief Development Officer, announced his resignation from the company at the same time he announced that he is joining private capital firm Silver Lake Partners.

Giancarlo, who is 50, indicated that he was "fully aware of his biological clock" in announcing the decision to leave, which seems to be very amicable between himself and Cisco. Chambers, considered to be one of the best CEOs on the planet, is simply not going to leave any time soon -- and his lieutenants can't wait around forever waiting for the top spot, naturally.

Giancarlo will be missed at Cisco, no doubt -- but he won't be replaced. Cisco will turn his duties over to a new strategy group. In the call between the two men, words like "I love ya" and "You can still reconsider" were used, which is extremely rare when an executive leaves any public company. Maybe that's the testament to the culture Chambers has instilled at Cisco, which remains ranked as one of the best places in America to work.

TheStreet.com's Jim Cramer suspects that nimble traders can enjoy real gains on this sector's run into year-end.

Can someone remind me what the bear case for tech was?

Oracle (NASDAQ: ORCL) (Cramer's Take), which has a huge business in financial services, shoots the lights out with a remarkable quarter. And then right on top of it, Research In Motion (NASDAQ: RIMM) (Cramer's Take), again laden with financial services, issues a huge quarter that kind of blows the mind after all that it has done already.

Before that we had Adobe (NASDAQ: ADBE) (Cramer's Take), again a much-used product in finance, print a quarter that was so strong that I was surprised the stock didn't leap.