fnews.yahoo.com
A bit on the recent deals that Cisco has gotten:
We know the drill. But how long before the drill changes?
Cisco ( (Nasdaq:CSCO - news) ) is expected to earn at least 35 cents a share for its fiscal second quarter ended last month,
according to a First Call survey of analyst estimates. A year earlier, it earned 29 cents a share. Look for another healthy
quarter, thanks to Cisco's stable of Fortune 1000 clients.
And investors are speculating that, with the stock trading at such lofty levels, management is likely to declare a stock split. The
stock closed yesterday up 3 7/16 at 115 in heavy trading.
But the game is changing now that telecom supplier Lucent ( (NYSE:LU - news) ) is acquiring computer networker Ascend (
(Nasdaq:ASND - news) ). Cisco is now under more pressure to sell carriers on its brand of Internet-based telephone
equipment. Cisco's conference call tonight should provide clues about its progress in penetrating the phone business.
Analyst Bill Rabin with J.P. Morgan expects Cisco and Lucent to share some large customers -- but they will still compete for
each product line. Lucent will be even more competitive after acquiring Ascend, which already leads Cisco in building large
"asynchronous transfer mode" switches that relay data -- and potentially voice messages -- on carriers' networks.
"The biggest thing to look for is what [Cisco] says about its new ATM products," says Rabin. Cisco recently sold its new ATM
switch, known as MGX, to MCI WorldCom ( (Nasdaq:WCOM - news) ) and to the European carrier Swisscom.
"I expect to see some resurgence in Cisco's market share," says Rabin. In particular, it will seek business in Europe, where
Deutsche Telekom ( (NYSE:DT - news) ADR), British Telecom ( (NYSE:BTY - news) ADR) and France Telecom (
(NYSE:FTE - news) ADR) are planning buildouts. Rabin rates Cisco shares a buy; his firm has no banking ties to Cisco.
The rise in Cisco's stock has prompted speculation that the company will set a stock split tonight. A stock split increases the
number of outstanding shares and cuts the share price, making shares more palatable to the retail investor.
A stock split "certainly helps psychology" among retail investors, says Steven Schuster, portfolio manager with Gemina
Capital.
"I don't think that there's anything to stop this stock," says Schuster, whose firm bought Cisco shares in October. "I'm not
comfortable about it," he adds, but he won't sell (partly because of a lower tax rate for holding the shares for 12 months or
more).
At a record high of 115, Cisco might be overdue for a split. The company has split its stock seven times since its IPO in
February 1990. In late 1997 and late last summer, Cisco split its stock 3-for-2, and both times, the announcements came on
the same day the company reported earnings. Cisco announced those splits when its share price hit roughly 80 and 97, presplit,
respectively. |
