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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 78.96+0.3%Jan 28 3:59 PM EST
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To: Stock Farmer who wrote (65015)11/5/2003 4:07:30 AM
From: elmatador  Read Replies (1) of 77400
 
Prepare to be romanced by Silicon Valley's chief spin doctor. John Chambers, chief executive of Cisco Systems, will be in full flow when the data networking giant reports earnings on Wednesday. But while his message of cautious optimism and a solid performance have provided reassurance, they cannot disguise the main concern: that Cisco has a growth stock valuation without the growth.

Mr Chambers was once one of the technology world's most notorious peddlers of internet hype, promising long-term growth of as much as 50 per cent a year. These days, he has mastered the art of understatement. Setting the right expectations has become the key to stock market outperformance for the tech sector.

With big corporate buyers still on the sidelines, the US tech industry's sales in the third quarter were around 6 per cent higher than a year before. However, some 4 per cent of that reflects a currency effect from the lower dollar. More than 80 per cent of tech companies beat earnings forecasts in the third quarter. Barring an unexpected reversal, the same is already on the cards for the final three months: revenue targets have been set around 2 percentage points below the level attainable with a normal seasonal bounce, according to Sanford C Bernstein analysts.

Cisco's latest quarterly revenues are set to rise by barely 1 per cent. More important will be guidance for the coming year: Wall Street is hoping for sales growth of around 7 per cent. That hardly supports a valuation of eight times sales - but as Mr Chambers has shown, a good bedside manner is all.

news.ft.com
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