The Journal tries to divine why the networking giant isn't going anywhere:
After the close of trading today, Cisco is expected to release its fiscal second-quarter results. The earnings come on the heels of its $6.9 billion purchase of television set-top-box maker Scientific-Atlanta Inc., one of several efforts by Cisco to kick-start growth again. Still, investors on both sides of the stock market's aisle -- growth and value -- are giving the stock a shrug.
Cisco's growth prospects aren't sexy enough for the former and the stock, trading at nearly 17 times its expected per-share profits for 2006, still isn't cheap enough to wow the latter.
"We have looked at it because it's come down so much," says David Dreman, chairman and chief investment officer at Dreman Value Management in Jersey City, N.J. "But there's not enough growth for a growth investor and not really enough value to tempt a value investor."
The article asks more questions than it answers, pointing out mainly that the stock stands in some soggy middle ground, in which growth is barely into the double digits, the PE isn't that low, while at the same time there more several more exciting stocks, like Google and Apple, that an investor can buy into if they want excitement. Furthermore, it's been the story for some time that there just isn't much pricing power in hardware right now. And while the company is back to its old ways of buying out companies (now it's trying to reposition itself as a consumer electronics play), it's doubtful that they'll be able to scale-up acquisitions the way they did in the glorious 90's (we talked about this recently).
It used to be that stocks like Cisco and Juniper once had the super-sexy moniker of "Internet-backbone" plays, but now I think that label must be reserved for Google's Adsense.
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