The Cisco Effect

Aug 08 2001

The lackluster fourth-quarter earnings report Cisco put out Tuesday evening has done little to motivate technology investors Wednesday morning. Nor is there much other news on the business or economic front to motivate traders.

Both major indexes started lower and inched higher as the morning wore on. As of 11:30 a.m. EDT, the Nasdaq gained 7.92, or 0.4 percent, to 2035.71. The Dow Jones Industrial Average was off just 2.42, or 0.02 percent, to 10456.32. The sweltering dog days of August have kept market daredevils - and almost everyone else - on the sidelines during the past few days.

The Standard & Poor's 500 gained 0.41, or 0.03 percent, to 1204.81. And The Industry Standard 100 dipped 1.23, or 0.35 percent, to 349.39.

Tech investors, now keyed to macroeconomic data, may turn for insight to Wednesday's afternoon's release of the Beige Book, which relates anecdotal accounts of economic conditions in Federal Reserve districts. Wednesday morning's wholesale trade figures for June - sales down slightly and inventories up a bit - provided no earth-shattering revelations. And Cisco's report and next week's Applied Materials report will just about max-out earnings calls for the season.

And just in time. Router maker and tech bellwether Cisco didn't have much to reveal on its Tuesday call. The company met estimates, reporting in-line earnings and revenue at the low end of guidance. CEO John Chambers did say that it would be tough for the company to meet current growth targets. Cisco fell 46 cents, or 2.4 percent, to $18.80. Cisco competitor Juniper Networks lost $1.20, or 4.6 percent, to $24.70.

Cisco suppliers such as BroadCom and Vitesse were up nearly 2 percent, though, as Cisco's balance sheet showed inventories continuing to drop. That's good news for any company that sells or manufactures for Cisco. Contract manufacturers Solectron and Flextronics inched higher.

In the non-Cisco world, Microsoft gained 65 cents, or 1 percent, to $67, stoked slightly by the company's appeal to the Supreme Court to overturn the lower court's antitrust rulings. Microsoft argued that the appeals court, which overturned certain district court positions, should have thrown out the entire case. Mr. Softie's delaying tactics could make basketball coach Dean Smith - creator of the famous "four corners" offense - jealous.

Competitors Oracle and Sun Microsystems were also up, but not because of Microsoft. Oracle jumped 21 cents, or 1.2 percent, to $17.45. Sun gained 77 cents, or 4.5 percent, to $17.85 after announcing a joint marketing and distribution deal with current business partner Hitachi.

TMP Worldwide, owner of the Monster.com job board, gained $4.48, or 9.1 percent, to $53.90. The company beat analysts' estimates and its own guidance for the second quarter on the incredible growth of its Monster business unit. Its mainstream lines of business - executive search and advertising - actually dipped in year-over-year comparisons.

In other action, Web host Exodus Communications has risen 61 cents, or 29.6 percent, to $2.67. The struggling company's stock is up more than 150 percent in the past few weeks as rumors swirl about financing and takeover prospects. Siebel Systems lost 5.7 percent on a cautious note from Bank of America. BEA Systems dipped 5.6 percent on lowered estimates out of Prudential. Ariba gained 7 percent.

PMC-Sierra gained 4.4 percent to $38.04, rallying with other Cisco suppliers.

On the Big Board, Cisco competitors Lucent and Nortel diverged; Lucent dipped 1 percent as Nortel gained 0.6 percent. EMC, Nokia and AT&T Wireless were all weak. Micron Technology and Motorola were both higher as Texas Instruments dragged.