Wednesday, August 08, 2007

The Halo Effect of Cisco Systems (CSCO)


People love to talk about the "halo" effect for Apple (AAPL). That is, as iPods and iPhones gain popularity, consumers become more aware of the brand and are more apt to buy Apple PCs also, which really helps boost the company's earnings.

Well, Cisco Systems (CSCO) has a large halo effect of its own. Its halo effect has to do with the large ecosystem of companies that benefit when the tech giant is clicking on all cylanders, as it seems to be doing now.

We know this because of the incredibly bullish comments that CEO John Chambers made during and after its conference call. He said that, "he believes this is the strongest global economy he has seen in his career." He also said that CSCO is in its 2nd phase of Internet growth and believes it could be as big as the first phase we saw in the '90s. Last, he raised the company's long-term revenue growth forecast from +10-15% to +12-17%. All in all, very bullish comments.

So all of those companies up and down the supply chain should be able to ride on the Kid's tailcoat. Case in point is Broadcom (BRCM), which is surging nearly +10% today on big volume.

long AAPL, BRCM

4 Comments:

At 10:22 PM, Blogger Grow Your Funds said...

The action in BRCM today was pretty amazing. CSCO's call was quite bullish and given the nature of Chambers to be cautious, people listened thats for sure.

Aaron
GrowYourFunds.com

 
At 5:23 AM, Blogger Dave said...

BRCM is a bad example for your article's premise of riding coattails. The main reason the stock was up yesterday is that BRCM was chosen as a new, major supplier of chips to Nokia.

 
At 7:47 AM, Blogger J. Kahn said...

Dave,
Good point. You are probably right, although CSCO did help I'm sure. Regardles, the "halo effect down the supply chain" thesis is still valid.

 
At 11:30 PM, Blogger Job said...

"This is amazing list like the previous one..
Thank you for this post..
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