Technology

Cisco (CSCO) And EDS (EDS) Take Big Tech Down

Cisco (NASD: CSCO) and EDS (NYSE: EDS) have businesses which point different directions on a compass. But, it is the same compass. In one day, Cisco was able to show that large capex tech spending was slowing while EDS said that the consulting business aimed at data center out-sourcing was in the dumps.

To put a point on it, the whirlpool of falling tech earnings is pulling in almost every company in the sector. Reason did not prevail among those who hoped that large companies would continue to put money into next-generation upgrades of existing hardware and software. That puts the need for consulting services well out of consideration for most firms.

Cisco’s numbers probably point to a drop in the rate at which cable, telecom, and cellular providers are willing to upgrade their broadband networks. That is likely to cascade into slower sales for set-top, handset, and fiber vendors. It is a rolling snowball from Hell.

Cisco’s shares are down 30% over the last three months. Citigroup’s (NYSE: C) are down only 20%. Over that same period, EDS shares are down more than JP Morgan’s (NYSE: JPM).

Assuming that big tech stocks could fall more than big financial company shares in 2008 is not so far-fetched.

Douglas A. McIntyre