Throw This Stock Away

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I'll be the first to admit that dissing stocks in a falling market is no barrel of laughs. It's more like shooting fish in a barrel.

However, it's still a weekly challenge to pick a bloodied stock that I feel will continue to get pummeled and then come up with three worthy replacements that should beat the market.

Who gets tossed out this week? Come on down, Cisco Systems (Nasdaq: CSCO).

The Cisco kids
For a brief moment several years ago, Cisco commanded the country's largest market cap. Why not? The Internet and networking revolutions were humming along, and everyone wanted to be connected.

Things are different these days. Cisco is still a market leader. Unfortunately, it's tied to the corporate world's desire to expand and upgrade its networking equipment, and router rooters are hard to come by in this soft economy. Even with existing growth niches, like data-center virtualization and digital video delivery, Cisco is ultimately a slave to the economic doldrums.

How many companies can you name that have not announced layoffs lately? As Fed bailouts force companies to rethink their spending habits, you'd better believe that IT budgets will be tightened under fear of greater scrutiny.

Besides, even if companies did want to send more money Cisco's way, where would they get it? The IPO and venture capitalist spigots have run dry. Creditors are clutching their greenbacks as if they were Honus Wagner baseball cards.

A global powerhouse like Cisco can sometimes offset stateside weakness by taking healthier steps overseas, but this is a worldwide economic funk, folks.

You don't need to take my cautionary tone for granted. Analysts are telling you everything you need to know about the near-term challenges for Cisco. They see revenue falling by 4.4% this fiscal year (which ends in July), before making most of that back with a 3.8% uptick in fiscal 2010. In a nutshell, Wall Street thinks that the company won't match the revenue it generated last year until fiscal 2011 at the earliest.

Things get worse on the bottom line. Over the past three months, analysts have been whacking away at Cisco's profit projections.

Fiscal Year	EPS Today	EPS 90 Days Ago
2009	$1.39	$1.67
2010	$1.52	$1.92

Source: Yahoo! Finance.

Shaving 17% off this year's bottom-line production and 21% off next year's target may not seem like much, but keep in mind that the trend is clearly heading toward even deeper forecast cuts. Cisco may seem cheap at around 12 times this year's guesstimate, but not when you consider that the multiple will increase as projections continue to shrink.

Until IT spending ramps up again -- which could take a while  -- Cisco will struggle.

And now, the good news
As I have every week, I don't talk down a stock unless I have three alternatives that I believe will outperform the company getting the heave-ho. Let's go over the three fill-ins:

Hewlett-Packard (NYSE: HPQ)
Believe it or not, there are stateside tech titans that haven't seen their near-term outlooks slashed. Over the past three months, profit projections for the current year haven't budged much at companies like HP and enterprise software giant Oracle (Nasdaq: ORCL). I'm going with HP here, because earlier this week,the company announced that it will exceed Wall Street's fourth-quarter expectations. Analysts also expect double-digit revenue growth over the next year.

Salesforce.com (NYSE: CRM)
Belt-tightening companies will find ways to shave costs, and cloud computing is a no-brainer. Companies like Salesforce, Google (Nasdaq: GOOG), and NetSuite (NYSE: N) have booming cloud computing initiatives, providing cheaper enterprise and productivity software by serving it up remotely via the Web. I like Salesforce here as a pioneering pure play. Analysts see earnings doubling to $0.30 a share this year, and nearly doubling again next year to $0.56 a share. Good luck finding those kind of growth spurts in tech these days.

SYSCO (NYSE: SYY)
SYSCO and Cisco may be phonetic twins, but there's no mistaking the two in person. SYSCO is the country's leading food-service company. That may not seem like a healthy niche, with casual-dining chains struggling for patrons. But SYSCO also services the thriving fast-food chains, as well as evergreen institutional customers like schools, hospitals, and prisons. The best proof of SYSCO's consistent growth is that it has hiked its dividend every single year since going public in 1970.

Other headlines out of the weekly trash can:

• It's So Much Worse Than You Think
• How Bad Will It Get?
• An Outrageously Cheap Tech Stock