The Buzz

All markets and investing news all the time

Can Cisco make a comeback?

November 9, 2012: 12:11 PM ET

Cisco CEO John Chambers has given shareholders back a big chunk of the company's cash through a hefty dividend. But it's not enough to satisfy investors that want stronger earnings growth.

Is cash (or caysh if you pronounce it like Cisco Systems CEO John Chambers) king? We may find out Tuesday. Cisco (CSCO) reports earnings after the closing bell on Tuesday.

It's been a tough year for the networking giant. Shares are down 6.5%, despite the fact that it has nearly $50 billion in caysh on its balance sheet and is putting a lot of it to use with a dividend. Cisco's quarterly payout now yields 3.3%. That's more than double the rate of a 10-year U.S. Treasury note!

Shares did gain nearly 1% Friday even though the stock was downgraded by analysts at JPMorgan. And to be fair, Cisco is hardly the only company in its sector that is struggling. Shares of smaller networking competitors Juniper (JNPR), F5 Networks (FFIV) and Alcatel-Lucent (ALU) have all taken a bigger beating in 2012. But it has to sting Cisco longs that the company has fared so poorly while most big tech stocks are having a solid year.

Nonetheless, it's hard to find too many fans of Cisco these days. Traders on StockTwits seem to think that the company's transition from growth stock to value stock is now fully complete. With shares trading for less than 9 times fiscal 2013 earnings estimates, it would appear they are right. And the problem for investors throughout tech is that Cisco remains a bellwether. If Chambers issues a gloomy forecast for his company, that could mean bad news for a lot of companies.

stephanie_link: JPM d/g $CSCO on weak govt and enterprise spend. No surprise here.

sm_sears: Mark your calendars for $CSCO earns on Tuesday. JPM says often sets tone for tech sector. UBS Tech Conference sked for Nov 14/15.

As dominant as Cisco is in its area, it can't overcome the fact that there is little growth in the business right now. Analysts are only predicting annual sales increases of 6% in fiscal 2013 and 2014.  So investors that might find Cisco attractive have to keep hoping for more dividend increases. And some worry that could be in jeopardy due to President Obama's re-election and the battle over the fiscal cliff.

graemethickins: "Election Fallout: Will Tech Cash Piles Remain Trapped Overseas?" (Eric Savitz/Forbes) http://t.co/MSt4kUJL $AAPL $CSCO $MSFT

Still, one trader thinks that more infrastructure investments from telecoms like AT&T (T) could be good for Cisco and the rest of the sector.

vcutrader: $T analyst day talking up new spending plan - should benefit $CSCO $JNPR $ADTN$CIEN

Another investor said that Cisco may be too cheap to pass up given its fundamentals.

sageinvestors: Opened posn in Cisco Systems ($CSCO). strong ROIC, low debt, dom posn in mkt. Co restructure proceedng. Buying on mkt weakness.

And now for the Reader Comment of the Week. Sure, there was a lot of chatter about that election thing and the fiscal cliff. But many of my Twitter followers seem to be far more interested in the recent train wreck that is Apple's (AAPL) stock. Shares are now more than 20% below their all-time high from September, putting the iEverything maker into bear market territory.

One follower pointed out that Apple is now a victim of lofty expectations. Even though opening weekend sales of the comapny's iPad Mini and 4th generation iPad were strong, investors still hunger for more. For perfection.

Ha! To continue with the soccer (sorry, football) comparisons, Apple's stock is sadly doing about as well as Manchester United (MANU) since its IPO this summer.

Join the Conversation
Fear & Greed
Sponsored by
About This Author
Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

To view my watchlist

Not a member yet?

Sign up now for a free account
Stupid Stock Move of the Day
#StupidStock Move of the Day! $SHLD up nearly 5% on rumors of store closings & layoffs. Cost cuts needed. But what about plan to grow sales?
Powered by WordPress.com VIP.
Follow

Get every new post delivered to your Inbox.

Join 241 other followers