Cisco took a bit of a breather from its resurgence as tech bellweather to throw a bit of a macroeconomic scare into the market yesterday. The general consensus was that their earnings were not bad, and in fact came in a hair above estimates. But forward guidance for EPS of $0.44-0.46 was a few pennies short of projections, and the accompanying commentary raised a few goosebumps.
In the conference call, CEO John Chambers basically gave a long-winded version of the 'low visibility' type of guidance, describing the environment as 'cautious' and saying that while CEOs tell him they plan to spend more they immediately start qualifying that intention with worries about Europe and/or India and/or government policy, and that the second half is "really hard to read", and on from there.
The equipment sector is very sensitive to the short term spending fluctuations of carriers, and whatever the macro economic environment brings will surely be magnified. We have heard conflicting stories from companies across the sector about this for two quarters now, and it seems likely to continue. Everyone's just a bit jumpy currently, but the underlying supply/demand environment seems fairly stable to me. That is, as long as Europe doesn't implode and... oh wait I'm doing it too - it must be contagious.
For its part, Cisco looks like it is about to open down 7% and will probably drag everyone else down with them for today.
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