Cisco Drags Down the Market

The market is being dragged down today by lousy guidance from Cisco (CSCO). So far, our Buy List isn’t down as much as the rest of the market, although AFLAC (AFL) is currently down over 3%.

Wall Street had been expecting Cisco to earn 42 cents per share for this quarter. Instead, the company said it will be no more than 35 cents per share. The stock has been down as much as 17% today.

Think of it this way: a miss of seven cents per share leads to a loss of 420 cents in the share price. If the seven cents happens each quarter, today’s haircut has a P/E Ratio of 15 (420 divided by 28).

I’ve long been critical of Cisco’s endless stock buybacks. I was happy to see that the company will finally pay a dividend sometime this fiscal year. The big question now is how much they will pay. Like lots of companies, Cisco has tons of cash. The problem is that it’s held overseas and bringing it home will lead to a nasty tax bill.

Posted by on November 11th, 2010 at 10:45 am


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