Though in very different businesses, both are seen as barometers of the sector and looked at closely by investors and analysts alike to feel the pulse of the market and industry. A few years ago this might have been a valid approach, as these companies grew balistically, but today they paint a very different picture. Cisco and Nortel have both blamed a slowing US economy for their troubles, but I'm not so sure I agree. There is more to it than meets the eye, and what is being blamed on a supposed slowdown may actually be rooted in troubles in these companies' own backyards. With growth comes the need for a company to reinvent itself and keep itself agile and competitive, be it Nortel or Coke or McDonalds.
Insiders say neither company has actually managed to do that.
Heady with rising cash profits, Cisco gobbled up smaller companies supposedly to acquire technology, but more likely to kill the competition. Nortel too has not been able to re-draft itself as it grew form an old industry cable layer to the position it holds today. What these two are blaming on a bad environment may be a cover up for a nasty mess that lies within them. It was a badly needed correction to bring some rationale to a euphoria that was bordering on fantasia. Unemployment was near zero, growth high and the US economy a few months ago looked ready to consume itself to death.