Cisco's quarterly report to offer gauge of technology demand

Mon Feb 8, 2016 5:22pm EST
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By Noel Randewich

SAN FRANCISCO (Reuters) - Investors spooked by a steep sell-off in enterprise tech stocks will get a fresh glimpse of the health of technology spending on Wednesday when bellwether Cisco Systems Inc posts its quarterly results.

The networking equipment maker is the largest of several companies reporting this week that have benefited from the trend toward information technology (IT) delivered over the Internet, widely known as cloud computing. But Cisco relies heavily on demand from China and other developing countries whose economies have been losing steam.

Stocks of companies selling cloud computing and data analytics fell for a second session on Monday after Tableau Software Inc last week disappointed investors with a weak revenue forecast.

Analysts for year have been hyping companies in cloud computing and "Big Data," which refers to the analysis of growing amounts of stored data, and investors are becoming more critical of the valuations on such stocks.

Cisco's stock was unchanged on Monday while shares of other enterprise technology companies reporting this week fell sharply.

Along with Tableau's disappointing report, Monday's poor revenue forecast from IT services provider Cognizant Technology Solutions Corp stood in contrast to relatively upbeat reports from Microsoft Corp and SAP SE , leaving investors uncertain about the broad health of IT spending.

Cisco is expected to report a 1.5 percent drop in revenue for the January-ended quarter, according to Thomson Reuters, but investors fear the current quarter could be worse.

"If Cisco gets up and says 'We're worried about macro conditions in emerging markets hurting overall demand for technology', that's a big wet blanket on the branded IT companies," said Needham & Company analyst Alex Henderson.   Continued...

The Cisco Systems logo is seen as part of a display at the Microsoft Ignite technology conference in Chicago, Illinois, May 4, 2015. REUTERS/Jim Young