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Wednesday, February 6, 2008

Cisco (CSCO) Q2:08 Results

Cisco declares customers are cautious and guides revenues up 10% y/y for Q3, which equates to about $9.75 bil -- the street is at $10.2 bil for that quarter. Q4 guidance doesn't even make it to the table -- they won't even guess. They reiterate a long-term revenue growth target of 12-17%, which frankly feels like a downtick from last quarter when I heard other analysts extrapolating a higher low-end of their range based on the strength in their business.

Book to bill came in at roughly 1.00 which is also a downtick. The economic weakness is becoming very apparent. I expect we'll hear about how business got much weaker entering January, echoing the comments of a number of other companies.

Cisco is a technology pivot like Intel. The decline in tech coincides with Cisco's last quarterly report, almost to the day -- November 8th was the post-report trading date. The Philadelphia Semiconductor Index (SOX) peaked on Nov 8th at 450, last sale: 346.9. That's a 23% decline.

As I said, Cisco is a pivot. The trend is eligible for change when they report. Ridiculous as it sounds, I think you're going to have the right ingredients for a gigantic rally after the open tomorrow morning. That doesn't mean it happens. It just means people will come in thinking the world is ending. It's an opportunity for unilateral market failure consensus. If they kill them tonight... if they open really weak tomorrow... if you see a slew of downgrades... the first prices could be the worst prices.

I come up with about 323 as the line in the sand for the SOX... and where I figure they'll open tomorrow morning.

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