Cisco Systems Inc. and Akamai Technologies have taken major downturns in the stock market today. This ends the eight-day rally the Dow Jones has had recently. Cisco, the leading networking equipment maker, posted 14 percent losses today. This was the largest decline among the 30 stocks on the Dow. The production decreases the company forecasted are largely the result of fewer sales to government institutions in developing countries.
Additionally, Cisco is meeting higher competition with companies such as Hewlett-Packard and small companies Juniper Networks Inc. who have both begun a campaign to drive business toward its core network switching business. Cisco’s network switching business comprises over a third of Cisco’s revenue.
The 52-week low Cisco posted is not necessarily indicative of the stock’s future. The analyst cited in the Wall Street Journal, Jess Lubert of Wells Fargo, has recommended to investors to start accumulating this stock based on the fact that Chief Executive John Chambers stating his goal of paying out a 1 to 2 percent dividend for investors by the end of the year.
Cisco’s response to the downturn in its share prices has largely been confident that the stock will rebound based on product transitions that will lead to future growth.
The response from other analysts such as Richard Gardner from Citibank has been less positive saying that it’s a lose-lose situation in the near to mid-term. Pricing pressure, he says, will weigh down revenue and margin growth.
In comparison to the disappointing news on Cisco, other technology stocks have recently posted impressive gains. Juniper, for example, recently posted a 26 percent increase in sales. This is largely due to the increase in corporate spending in the past quarter.
As a result of the market share Cisco has on the Dow, this exchange is down by 10 points to 12,229 according to Business Week.
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com
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