Paradoxically, Big Tech Earnings Suggest Recovery

Our outstanding Q2 results exceeded our expectations and we believe they provide a clear indication that we are entering the second phase of the economic recovery.  During the quarter we saw dramatic across the board acceleration and sequential improvement in our business in almost all areas.

– John Chambers, CEO Cisco Systems

Paradoxically, as the market sells off convincingly, earnings overall, and especially big tech earnings, suggest a recovery.  I am talking specifically of recent reports from Intel (INTC) and last night’s from Cisco (CSCO).

Take a look at the revenue numbers:

                                Intel                         Cisco*

4Q 2009              $10,569                     $9,815

3Q 2009              $9,389                       $9,021

2Q 2009              $8,024                       $8,535

1Q 2009              $7,145                        $8,162

4Q 2008              $8,226                        $9,089

3Q 2008              $10,217                     $10,331

2Q 2008              $9,470                       $10,364

1Q 2008              $9,673                        $9,791

* Cisco is on a different fiscal calendar and its quarters end one month after the calendar quarters.  So, for example, last night’s earnings report which I have put under 4Q 2009 actually ended January 23, 2010.

In both cases, the revenue numbers paint a consistent picture: Dramatically declining sequential revenues in the 4th quarter of 2008 and 1st quarter of 2009 followed by notably increasing sequential revenues for the last three quarters, with undeniable growth the last 6 months.  That’s what a recovery would look like.

Odd then, that as the numbers start to look better, the market is selling off.  However, the stock market does act this way more than you might think.  More on what’s going in later posts.

Disclosure: Top Gun has no position in Intel (INTC) or Cisco (CSCO) shares but is short the Nasdaq-100 via the QQQQ.