Why Cisco Isn't Following the Dow Down Today

Shares of Cisco Systems have jumped 0.4% today, adding about a point to the Dow Jones Industrial Average , which is down 14 points overall as of 1:40 p.m. EST. In other words, it's a fairly encouraging move on a generally gloomy market day.

It's earnings season, and quarterly reports did indeed move Cisco today -- not Cisco's own, of course; the networking giant is slated to publish results in two weeks. But even mighty Cisco doesn't operate in a vacuum. One network security stock and one routing and switching rival showed their hands after last night's closing bell, and they're good ones.

What's going on?
Juniper Networks gained 3% as adjusted earnings of $0.28 per share breezed past the Street's $0.22 estimate. More to the point for Cisco investors, CEO Kevin Johnson said that he sees stronger spending coming in the crucial service-provider market. Telecoms and data specialists need to update their core routers to keep up with ballooning bandwidth demands, and the global economy is finally letting them sign a few big checks.

This is obviously brilliant news for both Juniper and Cisco -- two of the largest equipment-providers for this long-frozen sector. "It's still early and it still varies by geography," Johnson concedes, but the recovery is finally happening.

Security products are less of a core product for Cisco, but the company does dabble in the market, and investors should keep at least one lazy eye on the competition here. And, like I said, the sector had some good news to share last night.

High-speed security specialist Fortinet is soaring 24% today after crushing last night's fourth-quarter report. Analysts expected $0.15 of non-GAAP earnings per share on sales in the neighborhood of $144 million. Instead, Fortinet delivered $0.17 per share and a spectacular take of $151 million in revenue.

The sales execution problems of recent quarters appear to be a thing of the past, but that's good news for Fortinet and Fortinet alone. Cisco is feeling the love of Fortinet's overall market vibe.

Sales jumped more than 20% year over year in each of Fortinet's three geographic divisions, led by a 25% gain in the Americas. Breaking the numbers down further, CEO Ken Xie pinned most of the success on enterprise customers and service providers. These are exactly the markets that Cisco would love to see making big moves, and the comments are in line with Juniper's industry assessment.

Cisco's takeaway
So Cisco is doing what it can to keep the Dow floating near those elusive all-time highs, thanks to some help from its frenemies.

Taken together, these reports point to some serious improvement in demand for the biggest, fastest, and most profitable class of network equipment. Nobody is saying that AT&T suddenly ordered dozens of million-dollar core routers to support its 4G network growth last quarter, nor that the big telecoms will do this in unison next quarter.

But the consensus is growing: Capital investments are back in fashion in the telecom industry, and that's good news for the equipment builders. The large orders are coming, and a rising number of smaller deals are paving the way. Look for Cisco to cement this theory in two weeks when it reports second-quarter results and updates its own market forecasts.

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