Follow up: Cisco Systems, Inc.

CEO Chambers vs. Flip

The technology sector is weakening. In the midst of that, Cisco finds itself restructuring. Can this company save itself, while increasing it's stock value?

Last time I mentioned CSCO's stock, it was on a perpetual decline from its last earnings announcement. Read. Since then, a dividend and increase of outstanding shares have been the indicator that it is no longer seeing itself as a growth stock. This drove the stock all the way down to $17.

It is showing signs of reversal. One of the catalysts was the Nasdaq-100 restructuring. Cisco's portion will increase 2.1%. The other is the halt of their Flip franchise, intended for the consumer market. CEO John Chambers finally opened his mouth saying the company lost its ways. Aside from PR, this company needs to go back to what they do best: switches and routers. However, those 500 employees that will be put into the unemployment reserves will not improve improve the GDP's outlook.

My sentiment has changed. I see this becoming one of the safer stocks in the cyclical tech industry. However, any upward trend is still in the distant future. A greater earnings report (Save the date: May 11, 2011) will shoot this up to $19, but their outlook is still weak until Q3. Hold, Target price: $20.

Edit: I decided to create a visual; hope you enjoy.