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UPDATE: Microsoft, Cisco: New Developments to Move the Needle?

Wednesday, 11 May 2011 | 5:43 PM ET

Again on Wednesday, the Fast Money market pros were squarely focused on the tech sector and some major new developments.

On Wednesday, the latest results from Cisco beat Street expectations but the stock sold-off in extended trade after CEO John Chambers warned of another weak quarter as the company struggles to revive growth.

And a day earlier Microsoft made a bold move and announced plans to buy internet-phone company Skype for $8.5 billion in cash.

How should you interpret these developments? Do they signal upside for either Cisco or Microsoft?

Global Tech to Rebound?
Dan Niles, Alpha One Capital Partners, says big tech companies will squeeze out smaller guys. "Cisco needs to get realistic about growth," he adds.

- Cisco

Dan Niles of Alpha One is skeptical along with trader Steve Cortes and the rest of the Fast Money gang. Niles says the company can't escape a macro-slowdown in tech. "A quarter of Cisco revenue comes from public sector spending, but state a local governments are retrenching hard,” says Cortes. "And 20% comes from Europe," adds Niles.

However BGC analyst Colin Gillis is on the other side. A day before earnings were released he told us, “the upside is much greater than the downside.”

Not only does Gillis think the stock has been oversold, he believes Cisco is looking at growth down the road – strong growth.

“The most important change in technology is the smartphone explosion,” he says. Looking at the mobile data landscape he explains current infrastructure isn’t nearly robust enough to handle the skyrocketing demands of users. “And all that structure (that needs to be built) will require Cisco’s plumbing,” says Gillis.


- Microsoft

As we mentioned above, Microsoft landed in the headlines this week , after it announced plans to acquire Skype for $8.5 billion in cash.

None of the Fast Money traders were particularly enthusiastic about the deal, though they all concede there’s probably some synergy that will be created. In the near-term, however, the traders do not see the deal as a buying opportunity.

”This is not going to be a needle moving transaction for a company that clearly needs to do something needle moving,” says Gary Kaminksy.

Dan Niles is also skeptical of Microsoft but not because of the Skype acquisition. He says, "The problem with Microsoft is that they have 90% market share of the PC space and they can't escape that." In other words, they're not well exposed to the current trends in tech such as notepads.





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Trader disclosure: On May 11, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian owns (PFE); Pete Najarian owns (MRK); Pete Najarian owns (AAPL); Pete Najarian owns (TCK); Pete Najarian owns (AKAM); Pete Najarian owns (C); Pete Najarian owns (HPQ); Pete Najarian owns (TEVA); Pete Najarian owns (MS); Pete Najarian owns (RSX); Pete Najarian owns (GE); Pete Najarian owns (MSFT); Pete Najarian owns (YHOO); Pete Najarian owns (VLO); Pete Najarian owns (TER); Pete Najarian is long (RIMM) calls; Pete Najarian is long (AVL) calls; Pete Najarian is long (NTAP) calls; Pete Najarian is long (XLF) calls; Pete Najarian is long (PMCS) calls; Pete Najarian is long (CVS) calls; Pete Najarian is long (XL) calls; Pete Najarian is long (BSX) calls; Pete Najarian is long (HBC) calls; Pete Najarian is long (EWZ) calls; Pete Najarian is long (XLI) calls; Pete Najarian is long (FCX) calls; Finerman owns (M); Finerman owns (CMI); Finerman owns (LEA); Finerman owns (MSFT); Finerman is short SPY; Finerman is short (MDY); Finerman is short (IWM); Finerman is Long S&P 500 Puts; Finerman is Long Russell 2000 Puts; Terranova owns (VRTS); Terranova owns (AAPL); Terranova owns (JPM); Terranova owns (V); Terranova owns (BX); Terranova owns (UPL); Terranova owns (BAX); Terranova owns (PFE); Terranova owns (PEP); Terranova owns (MCD); Terranova owns (TM); Terranova owns (DIS); Terranova owns (BJ); Terranova owns (APA); Terranova owns (OXY); Terranova owns (XOM); Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU)

For Brian Kelly
Accounts Managed By Brian Kelly Capital are long Australian dollar
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For Joe Terranova
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Dan Niles
Niles and Alpha One own (AUO), (PAY), (NXPI)

Mike Khouw
**No Disclosures

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