Woof woof! Cisco and HP are still dogs of the Dow


It’s been a rocky start to the year for stocks. But the Dow is still up 7% as the first half of 2011 comes to a close. Alas, Cisco and HP are not taking part in the fun. Cisco is the Dow’s worst performer and HP is the third-worst.

The two companies are obviously quite different but many investors are frustrated about the lack of direction at both firms. I’ve written about those frustrations recently over on CNNMoney proper. Check out "HP is still trying to be the next IBM" and "Everybody hates Cisco." Even Ralph Nader is peeved at Cisco.

In an eerie bit of coincidence, each company is about to release a tablet that has been met with tepid reviews by the gadget cognoscenti. I seriously doubt Apple’s worried about HP’s TouchPad or Cisco’s enterprise-geared Cius.

But to be fair, some investors are probably being a bit harsh in their criticism of HP CEO Leo Apotheker, who’s only been on the job for a few months. Ditto for long-time Cisco CEO John Chambers, who’s not to be confused with the S&P managing director. (Amusingly, Politico was confused.)

To suggest that HP has lost its way or that Chambers has outstayed his welcome is short-sighted. After all, it’s not as if Cisco and HP have been in a funk for that long, right? Stocks often pull back after enjoying solid gains a year earlier. Just look at the chart for HP and Cisco in 2010.


Oops. — Paul

Cisco competitor to John Chambers: You’re too big!


Chart: CNNMoney

By now, you’ve probably heard about (if not read) the e-mail that Cisco CEO John Chambers sent to the company earlier this week. It was a stunning admission of the company’s failings in the past few years, with the biggest takeaway being that Chambers believes Cisco has “disappointed” investors and “confused” employees.

Much has been made about what Cisco needs to do to get back on track. I wrote about this just a few weeks ago over on CNNMoney proper. But one of Cisco’s smaller competitors has an interesting take: Cisco is simply now just too big.

Dominic Orr, the CEO of Aruba Networks, is going head-to-head with Cisco in the wireless networking market. Smaller companies like Aruba, as well as Juniper Networks, F5 Networks and Riverbed Technology (to name a few) have been able to nip at Cisco’s heels, taking away market share thanks to a more narrow focus.

Aruba is benefiting from the explosion in demand for wireless connectivity. And that’s because Orr has kept the company concentrated on just that: wireless.

Orr explained how Aruba was founded at the time that Intel was unveiling its Centrino chip designed specifically for laptops. That was a key moment in tech as it validated the notion that people would want to access the Internet on the go. And that helped begat the era notebooks, smartphones and now, of course, tablets.

Cisco is in wireless networking as well. But Cisco also owns disparate businesses ranging from cable-set top boxes and the Flip video camera to Web conferencing and security. That’s on top of the bread-and-butter business of selling routers and switches. Some investors are pressuring Cisco to cut some of the non-core businesses loose.

Orr, the subject of a fascinating profile by my Fortune colleague Stephanie Mehta in 2007, said that Cisco isn’t guilty of missing too many key tech trends. But it’s hard to be dominant in everything. And investors tend to punish companies for the jack of all trades and master of none approach to a market.

"It’s not a matter of Cisco missing it in terms of vision. The issue is just that Cisco is confronted with so many tasks," Orr said. "They always have been big. But they were alone. Now they are big in a crowded market."

The proof is in the pudding. And in case that tortured metaphor isn’t clear, that particular pudding of which I speak is stock price performance. Cisco is down 13% this year and 33% in the past 12 months. Aruba’s stock is up 44% this year and has more than doubled since last April.

"Cisco is a big company that may have been promising too much growth while its core business is under attack," said Orr.

Steve Blank, the author of “The Four Steps to the Epiphany” and an expert on start-ups, said that he thinks Cisco has taken the necessary step of admitting that it has to do things differently. But now Chambers has to execute if Cisco hopes to regain momentum from smaller rivals like Aruba.

"The world has changed. What’s old is new and what’s new is old. Even Google is becoming the new Microsoft," said Blank. "There is no guarantee that a company will live forever." — Paul

Recession’s officially over, but not according to recent tech earnings


photo: Anita Ritenour

The recession ended back in June 2009, according to the body charged with dating when economic downturns begin and end. (Fun job, huh?) CNNMoney has all the details on that report, but don’t blow off your fingertips with a bundle of fireworks just yet.

Instead, we’re going to take a look at recent tech earnings. Those reports can reveal a lot about business spending and the economy as a whole.

Some tech companies have reported great quarterly earnings lately. Late last week, Oracle reported double-digit percentage profit and sales growth in its first quarter, on the back of rising demand for business software and servers. Research in Motion beat the naysayers, reporting quarterly profit last week that beat analysts’ expectations. The BlackBerry maker also issued an upbeat forecast.

But other big tech companies haven’t fared as well. Late last month, Intel warned investors its third-quarter revenue will fall below its forecasts due to low customer demand for PCs. Cisco Systems posted a 79% jump in quarterly profit, but revenue missed Wall Street’s expectations and the company’s sales outlook was also a slight disappointment.

So again, we’re left with tepid statements like “mixed picture,” “muddy results,” etc. That’s pretty unclear, considering the recession ended more than a year ago. -Julianne