Cisco CEO: No Big Deal Talks; EMC Shares Tumble
Cisco Systems is not in deal talks with any big companies, Chief Executive John Chambers said in response to a question about his interest in buying giant storage company EMCWednesday.
EMC shares fell as much as 5.4 percent after Chambers appeared to rule out a deal with the company any time soon. Trading in EMC options also picked up after the comment, which he made in an interview broadcast on cable news channel CNBC.
"We don't have any negotiations with any large companies at this time" Chambers said in an interview broadcast on CNBC. (See the accompanying video for more from Cisco Chief Executive John Chambers.)
Chambers said that while he would "never say never, he noted that Cisco was focused on small and medium-sized acquisitions while it likes to forge partnerships with companies as big as Microsoft or EMC, the world's biggest maker of corporate storage products.
On July 30, EMC shares had risen as much as 6 percent on market speculation that it could be bought. At the time analysts had said the most likely suitor could be Cisco.
EMC shares were down 73 cents at $14.21 in morning New York Stock Exchange trade after falling as low as $14.13. Cisco shares rose $1.34, or 6 percent, to $23.99
In the options market, traders appeared to be bailing out of their EMC call positions, giving the right to buy the stock at a given price and time, analysts said. That suggests they were less convinced that the storage giant will be acquired than they were a week ago, the analysts said.
"People who were speculating that EMC might be acquired by Cisco are getting out of the stock, selling their call options and even buying some put options," said William Lefkowitz, options specialist at brokerage firm vFinance Investments in New York.
Joe Kinahan, chief derivatives strategist at brokerage firm thinkorswim, said that traders were selling August $15 calls, apparently in an effort to close out their bullish positions.
Chambers appearance came after Cisco reported earnings and sales that edged analysts' expectationsand affirmed its long-term growth forecast late Tuesday, saying it expects the weak economic environment to be relatively short term.
Chambers' said he had "very strong" confidence in Cisco's long-term revenue growth target of 12 percent to 17 percent, but he avoided giving a full-year outlook for the fiscal year that just began. Instead, he forecast revenue growth of 8 percent in the first quarter and 8.5 percent in the second quarter.
The world's biggest maker of computer networking gear reported earnings of 40 cents a share in its fiscal fourth quarter, excluding one-time items. Sales reached $10.36 billion.
In the comparable period last year, Cisco brought in a profit of 36 cents a share on a topline of $9.433 billion.
Analysts expected slightly less. A consensus estimate compiled by Thomson Reuters put Cisco's earnings at 39 cents a share and its sales at $10.310 billion.