Cisco Goes Cold, Nasdaq Heads Lower

It’s been a tough two days for the tech-heavy Nasdaq, led lower today (Thursday) by tech bellwether Cisco Systems (CSCO)

After the close yesterday the tech giant did the unthinkable and guided lower on what is now a global slowdown. That’s the news that has helped to turn the markets red today.

A bellwether, by the way, is loosely defined as anything that tends to create, influence or set trends.

It comes from the Middle English word “bellewether” and has nothing actually to do with the “weather” as we know it. It actually refers to the practice of putting a bell around the neck of a castrated ram (a wether) so that it may lead its flock of sheep.

So here’s the clang, clang, clang, that’s leading the market down a lonely road.

From Bloomberg by Vivek Shankar entitled: Cisco Shares Drop; Chambers Forecasts Sales Decline

Cisco Systems Inc., the top maker of networking equipment, declined in Nasdaq trading after Chief Executive Officer John Chambers forecast the first revenue drop in five years because of the financial crisis.

Sales will fall as much as 10 percent in the second quarter, which ends in January, Chambers said yesterday on a conference call. In August, he predicted a gain of 8.5 percent from a year earlier.

Business changed course after the credit crunch hit, pushing October orders down 9 percent, Chambers said, adding that his comfort level with the forecast was the lowest since the dot-com bust in 2000. Chambers plans to save $1 billion in costs over the next three quarters by curbing hiring, business travel and relocations.

“He’s normally a very optimistic guy, so when you hear him talk about the tone of business being what it is now, I don’t even know what to say,” said Chuck Heath, an analyst at UMB Investment Advisors in Kansas City, Missouri, who recommends buying the shares. UMB owns about 760,000 Cisco shares as part of $11 billion in assets. “It just makes you want to throw up your hands and give up.’

Of course, it was last year’s cautious 1Q comments from Cisco’s John Chambers that spooked the markets and basically marked the top of the Nasdaq.

Back then, Chambers was warning on the outlook for flat U.S. sales. Today it’s a broader warning on a global slowdown.

Meanwhile, Cisco is one of the first tech companies to report results that include October, the period of time when credit became the most strained. Cisco’s orders, which rose 7% in August from a year earlier, declined 9% in October, Mr. Chambers said

Now that is a pretty big swing in the wrong direction.

Clang…Clang….Clang…

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