Cisco's Earnings Plunge Weighs Down the Dow's Comeback

Outside the Dow, Time Warner and Comcast make history by announcing a $45 billion merger.

Feb 13, 2014 at 2:30PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The major U.S. stock indices are all rising in the afternoon session, with the Dow Jones Industrial Average (DJINDICES:^DJI) pulling out of the red and posting a solid gain of 54 points as of 2:35 p.m. EST. Most of the Dow's member stocks are having good, if quiet, days by advancing slightly. However, Cisco (NASDAQ:CSCO) plunged 3.7% in the wake of its earnings report yesterday, dragging down the index's progress with it. Let's catch up on what you need to know.

Cisco takes a beating
Cisco's fall today brough what had been a respectable start to the year for the tech stock to a screeching halt. Yesterday after the closing bell, Cisco announced that its fiscal second quarter revenue dove nearly 8% year over year, while the company's net income fell an even costlier 55% due to a major $655 million charge. While the revenue drop actually beat the company's projections of an 8%-10% dive, it's still a hefty blow for investors who have watched this networking giant struggle to find growth in today's evolving tech landscape.

Cisco did post some positive news. CEO John Chambers said the "Internet of Everything" could begin to help its financial performance; Chambers' forecast earlier this year was that this could be a $19 trillion market in coming years. Also, the company's third-quarter sales projections of between $11.2 billion and $11.5 billion actually fell around average analyst projections. Still, with competition intense, Cisco's quest to regain growth will remain elusive in the near term.

It's been a similar story that has plagued many of the older names in tech, as IBM (NYSE:IBM) has felt recently, although the tech stock has gained about 1% today to rank among the top Dow members of the day. IBM, the worst performer of the Dow over the past year, has seen revenue plunge as it looks to adapt to the changing landscape, and the company's sales fell 5% year over year in its most recent quarter. IBM will need to maintain the slow, single-digit percentage growth it saw in both its global business services division, where sales climbed 4%, and its traditional software unit if it wants to stave off further declines out of its plunging server business.

The big news today comes from outside the Dow. Comcast (NASDAQ:CMCSA) announced it would acquire rival cable company Time Warner Cable (NYSE:TWC) in a major move that will add a huge degree of consolidation into the cable industry across America. Comcast's stock has fallen more than 3.8%, but Time Warner's shares have climbed more than 7% in light of the proposed $45 billion deal. However, a regulatory review is ahead for the deal, as such a move will allow Comcast clear leadership in the area.

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Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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