There is simply no arguing that Cisco isn't overvalued on a historical basis and eventually will have trouble growing into its valuation. There's also no arguing that it's one of the best companies in the world and that, unlike Mr. Softee with the PC, its target markets continue to grow. It quoted one stiffly bearish and one exuberantly bullish sellside analyst. That's why the most important element of this evening's conference call will be Cisco's guidance. It will be in the drawled tone of John Chambers, the CEO, and what he says about future markets.
Cisco always beats consensus per-share earnings estimates by one penny.
Chambers' outlook is all that matters. One other relevant element of the Cisco story that hasn't changed is the way Cisco acquires other companies. Barron's fretted that accounting-rule changes would make it difficult for Cisco to maintain its acquisitions engine. I doubted that at the time, arguing that even if Cisco were forced to adopt an accounting treatment that caused it to report noncash losses, that the Street would look through those losses. Shares of Cisco have stalled, however.