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Somewhere in the stock market’s noise today, there’s a very clear signal: enterprise hardware sales are in trouble. Despite upbeat forecasts from Intel and Nvidia for the fourth quarter this year, a forecast from enterprise giant Cisco for this holiday season paints a terrifying picture that could signal the end of the business-tech comeback.
Cisco announced yesterday that it was lowering its outlook for the fourth quarter this year as sales of computer networking and teleconferencing equipment to the U.S. government and other large institutions fell more than expected. That ignited a broad selloff in the tech-heavy Nasdaq Composite index that has continued today (though inflation fears in China certainly haven’t helped).
Cisco’s announcement took the wind out of the sails of an apparent rebound in the technology — and particularly the enterprise — sector. Intel’s earnings for the third quarter beat expectations of analysts, thanks to solid demand from corporate customers. Intel, the largest chipmaker in the world, is largely seen as a bellwether for the rest of the tech industry — so when Intel is doing well, it’s likely that the rest of the industry is doing well.
Intel raised its dividend payouts by 15 percent today — a signal that the company is expecting a strong holiday season and can free up some of its cash for its shareholders. But that’s probably a result of strong demand for consumer electronics.
Intel is making a strong play in the consumer space with its Atom chips and the AppUp store, which will compete with Apple’s App Store and the Android marketplace. Add to that an upbeat outlook from Nvidia, which expects to stuff its graphics chips in just about every mobile device possible — including tablets and phones.
The result is a very clear signal that the consumer electronic space is going to be a strong point for sales this holiday season (as it often is). But nowhere in that equation is enterprise sales, and whether there’s any hope for companies like Cisco to ride the consumer-driven tech rebound.
Cisco is also betting on the consumer space with a living-room teleconferencing device, the Cisco Umi. But even then, the device is going to cost consumers a whopping $600 and an extra $25 a month. There are also a number of cheaper alternatives like Microsoft’s Kinect motion controller that can also serve as a teleconferencing device.
So is this the end of the enterprise tech comeback? Investors seem to think so. Cisco’s shares tanked after the announcement yesterday, and have fallen 18 percent to $20.07 today. That’s a 52-week low for one of the largest providers of technology for corporations. We’ll have to wait to see how the fourth quarter goes for big-business sellers like Salesforce.com and Cisco to know for sure what the final damage is.
[Original photo: daveonflickr]
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