Cisco CEO Misquoted
This morning Het Financieele Dagblad, a newspaper published in the Netherlands, heated the market faster than a Dutch oven when it quoted Cisco CEO John Chambers as saying that he expects an information technology spending recovery in two to four months. Reuters included the quote in a story it ran early this morning, fanning the flames of excitement. Cisco’s shares were up $0.26 (1.29%) to $18.99 before losing much of the gain.
“Everyone is looking for some confirmation that the market is turning,” says Stephen Kammn of CIBC World Markets.
Cisco officials quickly dampened the excitement by setting the record straight on Wednesday. Robyn Jenkins, a spokeswoman for the company, said that the Dutch paper had “misinterpreted” Chambers comments about a recovery. [Ed. note: Chambers also did not -- repeat, did not -- suggest that Regis Philbin should win the Nobel Peace Prize.]
“John did not provide any new information, and his remarks were not on update on the quarter,” she said in an email. “He said something similar at a Thomas Weisel financial analyst conference in mid June.”
So what did Chambers actually say? The same thing he has been saying for the past two years, according to Cisco officials -- that the timing of a recovery is uncertain. But once a turnaround in the economy is underway, information technology spending will improve roughly two to four months after that. And service provider spending is expected to follow that by about two to six quarters (see Cisco's Chambers Glows at N+I).
For the past few years, Chambers has been an industry bellwether. Even his most lukewarm comments have been known to move the market. During the bubble he was bullish on Cisco’s prospects. And even as the economy began to melt down in early 2001, Chambers remained optimistic (see Chambers: Cisco's Ready to Brawl and Cisco Misscos!).
But since Cisco itself started stumbling, Chambers has toned down his rhetoric to a much more subdued outlook. In the past two years, his comments on the state of the industry recovery have varied little (see Cisco Tops Expectations and Chambers Fires Up Market).
On the past two earnings calls he has used the exact same phrasing in describing a possible recovery: “We believe we have uniquely positioned Cisco as the inevitable recovery occurs, whether it is [in] one quarter or multiple quarters.” (See Cisco Profits Up, Outlook Down and Cisco: Profit, With No Nasty Surprises.)
“The one day that he stands up and says something new, it will be big news,” says Kamman. “When a recovery is real, he will make sure that everyone knows that the message has changed. John Chambers is not Alan Greenspan. He tends to be very clear about what his company’s position is.”
— Marguerite Reardon, Senior Editor, Light Reading