CNN/Money's Stock Spotlight: Sluggish tech spending has weighed on Cisco, but is the stock a buy?
October 25, 2004: 10:32 AM EDT
By Deshundra Jefferson, CNN/Money staff writer
NEW YORK (CNN/Money) - Investors have little love for Cisco Systems.
Cautious corporate spending on information technology this year has dampened the market's outlook for Cisco's growth prospects. As a result, the stock has lost more than 20 percent this year and is trading near its 52-week low.
But industry experts expect a small increase in IT spending in coming years, which should trickle down to Cisco's bottom line -- it's still the dominant maker of the switches, routers and other gear that connect companies' networks to the Internet.
Tech research firm IDC expects a 5 percent rise in tech spending worldwide in 2004 and 6 percent gains in both 2005 and 2006. While a five-to-six percent gain is hardly cause for celebration, it may be a signal that technology spending is ready for a comeback.
And Cisco has managed to do relatively well in this soft spending environment. Analysts forecast sales rose 18 percent in its fiscal year's first quarter, ending in October, and a 23 percent increase in earnings per share, according to First Call.
But many investors are swooning over Cisco's younger, faster-growing rival, Juniper Networks, which recently reported a nearly seven-fold increase in third-quarter profits on sales that more than doubled.
So can Cisco regain its mojo or are the company's best days behind it?
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