The primary driver of today’s selloff is concerns about Cisco’s (CSCO) forecast. Cisco reported a good quarter after the close yesterday, even though revenues of $10.84 billion fell $40 million short of analyst estimates. But CEO John Chambers was a little more cautious on the conference call than he was last quarter when he said “It doesn’t get any better than this”.
Chambers has been excellent in forecasting the economy in the last couple of years so when he speaks, people listen. He was one of the first to see the recession coming when he said US sales going forward would be “lumpy” in November 2007. And he was one of the first to note the emerging recovery when he cited a “tipping point” in August 2009.
Cisco’s shares are getting whacked today, down almost 10% knocking off more than $13 billion in market cap from the company. That’s definitely an overreaction based on the earnings report, but investors rightly place a lot of stock in Chambers views.
Chambers was on CNBC this morning pointing out the strength of the quarter and doing damage control. But it’s not having an impact today.
Disclosure: Top Gun has no position in Cisco (CSCO) shares.