Cisco CEO John Chambers’ comments that public sector spending will remain weak triggered a sell-off in his company’s stock and above normal action in Cisco options Tuesday.
“Public spending will stay tough this year – I wish I could give you a different answer to that – it’s probably going to get tougher before it gets better,” says Chambers, speaking at a Wells Fargo event.
The continued slowdown in public spending is not a surprise according to Shebly Seyrafi, FBN Securities Managing Director of Technology Infrastructure. The “company has been doing well especially since the early part of 2011,” he says noting that the spending comments might explain today’s price action, but that the stock remains attractive.
With about a fifth of Cisco’s revenue coming from public sector spending, the “worse segment is getting a little worse,” he says. “But most of their business is doing fine.”
Seyrafi rates Cisco an “outperform” with a price target of $27 a share.